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Engine of Change

July 24, 2006
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It’s a Thursday morning in early April, and the Global Engine Manufacturing Alliance plant in Dundee, Michigan, is open as it always is, 21 hours a day, six days a week, 294 days a year.

    But a visitor to the plant might wonder where all the workers are.

    True, for an auto engine plant, GEMA is more automated and thus leaner than most. The facility’s total headcount is 275, significantly less than a typical engine plant, which has 600 to 2,000 workers.

    But that’s not why the assembly lines seem empty, GEMA president Bruce Coventry says. "Since we’re ahead of schedule, a lot of our people are in training," he says.

    Sure enough, down the hall are three rooms filled with employees being taught a wide array of subjects, ranging from how to assemble an engine to the study of mathematical formulas designed to teach problem-solving skills.

    Over the next several months, these employees will receive up to 1,160 hours of such training in class and on the assembly floor.

    "The fact that we are ahead of our production schedule allows us to focus our people on problem solving and continuous improvement," Coventry says. "That’s a luxury that most organizations don’t usually have."

    And that’s why automakers from around the world, including GEMA’s three owners—DaimlerChrysler, Mitsubishi and Hyundai—are keeping close track of this facility, located 60 miles outside of Detroit.

    As General Motors and Ford seek to shed thousands of their union-represented employees, they are looking ahead to what kind of workforce they will need to compete in the increasingly global market.

    "They need a new business model for labor agreements and new kinds of workers," says Sean McAlinden, chief economist and vice president of research at the Center for Automotive Research in Ann Arbor, Michigan.

    Many are thinking that GEMA may prove to be that model, he says.

    The Dundee facility, which opened in October, stands out from other auto plants in every aspect of how it manages its workforce. Its hourly employees are highly educated and rotate jobs and shifts to provide for greater flexibility. That’s an unheard of concept in the traditional auto plant, where each worker is usually assigned to one and only one job.

    Another unique aspect of GEMA’s workforce model is that contractors, whom the plant refers to as "partners," work alongside assembly workers and engineers, sporting the same black-and-white uniforms. "We want everyone to feel like they are part of a team," Coventry says.

    But the most unheard of thing for the auto industry is that the United Auto Workers has agreed to the concept.

    "This is an agreement that every automaker is looking at with laser eyes," McAlinden says.

    GEMA expects to open a second facility in October on the same premises. At full capacity the Dundee plants will have 532 workers and produce 840,000 engines annually. Its goal is to be the most productive engine plant in the world, beating the industry standard of 1.8 hours of production per engine, says Mark Dunning, senior manager of human resources. The company says that so far GEMA is on track to hit those numbers, though it will not disclose preliminary data.

    The initial investment for the two plants was $804 million, 50 percent less than DaimlerChrysler had ever invested in an engine plant, Coventry says.

    The automakers’ joint venture also has two non-GEMA plants in South Korea and one in Japan that produce engines for Hyundai and Mitsubishi, respectively. When all of the plants are operational by year’s end, the venture will have the capacity to produce 1.8 million engines annually.

GEMA's origin
   
Coventry, who had been an engine plant manager for Chrysler since 1995, was the logical choice to come up with the idea for GEMA in 2001. Chrysler had recently bought a stake in Hyundai and Mitsubishi, and Thomas LaSorda, then head of DaimlerChrysler’s engine and transmission division, wanted to come up with ways for the three companies to collaborate.

    All three organizations needed four-cylinder engines. Coventry was LaSorda’s pick to help lead the project.

    A graduate of General Motors Institute, an engineering school established by General Motors and now called Kettering University, Coventry wanted to find a way to get rid of the waste and inefficiencies he had seen in traditional plants.

    "My pet peeves are bureaucracy, structure and management," he says.

    Over the next several months, Coventry and a team of executives from the three automakers brainstormed over meetings in Korea and the U.S.

    During these discussions, the group came up with a list of companies within and outside of the industry, such as Dell, Wal-Mart and Toyota, to serve as benchmarks for the business model they wanted.

Like its Japanese peers, the alliance wanted to focus on kaizen, the Japanese term for continuous improvement. But Coventry says that GEMA doesn’t want to just replicate Toyota, which he concedes is "the rabbit" all automakers are trying to catch.

    "We are doing many things that a Toyota employee would recognize, but the big differentiator is that our workforce has a much higher level of technical skill," he says.

    GEMA’s nonexempt workers, who start at $21 an hour and work up to $30 within five years, must have either a two-year technical degree, a skilled journeyman’s card or five years’ experience in advanced machining. This level of education is key to GEMA being more flexible, and thus faster than its competitors, Dunning says.

    The other guiding principles of the plant’s culture are problem solving and "the four A’s": anyone can do anything anytime, anywhere. This means that workers rotate jobs—a model that is designed to give the plant more flexibility. Everyone on the floor has a similar title: They are "team members" and "team leaders."
 


"Creating a plant around the concepts of flexibility and problem solving really comes down to the people we hire."
--Bruce Coventry

    By rotating jobs, the plant hopes to keep workers engaged and reduce the potential for injury, Coventry says. The chance of workers developing ergonomic injuries is lower if they aren’t repeating the exact same motions all day long, he says. So far there have been no ergonomical injuries at the plant.

    There are also no foremen overseeing the workers at GEMA. In their place are the team leaders. In contrast to foremen, the team leaders don’t stand on the sidelines observing how the teams work. They work alongside six-person groups, each one including an engineer.

    Coventry bristles if he sees engineers at their desks while he’s walking through the plant. "Having engineers on the floor enables us to solve problems right away when they happen," he says.

    The shift structure is also different. Most auto plants have two shifts: a day and night shift, five days a week. The more senior workers usually get first pick, which means they work days, while younger employees work nights.

    At GEMA, workers rotate shifts in crews of three, allowing the plant to have nearly continuous operation—21 hours a day, 6 days a week, 294 days of the year—while employees work only 196 days a year.

    Under this schedule, hourly employees work 10 hours a day, four days a week, alternating between days and nights. Every third week of their rotation, they get five consecutive days off, on top of vacation time. The day shift is 6 a.m. to 4:30 p.m., and the night shift is 4:30 p.m. to 3 a.m., which includes an unpaid half-hour break and two 12-minute breaks.

    The trade-off is that workers have to reset their body clocks to alternate between working days and nights in 10-hour stretches, instead of the usual eight-hour shifts.

    "But that allows our workers to come in 49 days less than at a traditional plant," Coventry says, noting that at most auto plants, workers come in 245 days a year.

    "Those are days that they don’t have to spend on child care or drive on $3-a-gallon gas."

    Very few companies have workers alternating between days and nights because it can be tough, particularly for older workers, to shift their sleeping patterns, says Acacia Aguirre, medical director at Circadian Technologies, an international consulting firm that helps companies with shift work. But if workers can be in bed by 3:30 or 4 a.m., it’s not that bad. They can still go to sleep while it’s dark outside and will probably sleep until 8 or 9 a.m., she says.

    However, workers who have to travel long distances to get home should be careful because the hours between 3 a.m. and 5 a.m. are when people are the least alert, Aguirre says.

Getting union buy-in
    Bringing a new concept to the table is never easy in labor relations, but GEMA’s management was ready to spend as much time as needed explaining the benefits of the workforce model. The UAW initially was concerned about the "four A’s" concept, says Bruce Baumbach, the GEMA plant manager who helped oversee the negotiations.

    "Their concern was that it would give management the ability to pull out anybody, anytime," he says.

    Baumbach explained to the union leaders that the idea was to have a flexible model and that it would encompass all positions, including managers.

    GEMA management also had to spend a lot of time making union leaders comfortable with the shift structure.

    "They felt that people should be able to decide what shifts they hold," Baumbach says.

    But the reason for the alternate shifts wasn’t just to increase productivity. It was also cultural, Baumbach says. By having alternating shifts, GEMA wanted to give workers the opportunity to know and work with one another and with salaried employees, who are only in during the daytime.

    "Especially since the management team is mostly in on days, we want all of our people to be able to experience working with them," Baumbach says. "The union understood that."

But the union was also concerned about how its members would adapt to working days some weeks and nights during others. To address this, GEMA developed a counseling session to give new employees tips on how to adjust their internal clocks to the changes, Dunning says.

    The UAW signed an agreement that lasts until 2011.

    "The UAW leadership understands the competitive situation that we are in," Coventry says. "None of us are happy about it, but they are realistic. The only reason they support this is because they believe it will allow us to be here in 40 years."

    UAW officials didn’t return calls seeking comment.

Creating a culture
    Getting the right people in the door was the next challenge. "Creating a plant around the concepts of flexibility and problem solving really comes down to the people we hire," Coventry says.

    GEMA placed ads in local newspapers and online and reached out to various organizations within a 75-mile radius of Dundee, Dunning says. For example, GEMA worked with Focus: Hope, a Detroit civil rights organization that promotes diversity and also has a machining technology institute.


The time and money spent of finding good employees are GEMA are considerable, but so is the payoff in terms of workforce creativity. "The amount of time from problem to solution is shorter than I have ever seen it in my 17 years at Chrysler."
--Mark Dunning, senior manager of human resources

    "They helped us identify diverse prospects with good technical and collaborative skills," Dunning says.

    Applicants to GEMA have to go through a grueling screening process that can take up to 12 hours. Only one in five candidates are accepted.

    The process, which was developed with the help of Development Dimensions International, a Pittsburgh-based leadership development consultancy, requires candidates to take two one-hour exams designed to determine whether they are a good fit for GEMA’s team-based environment.

    Applicants who score well are asked to take a four-hour interactive assessment, where they are evaluated as individuals and as members of teams. The assessments are meant to evaluate how they would handle hypothetical challenges facing the plant. For example, if a certain process within the plant wasn’t running efficiently, applicants would be asked to work as a team to figure out how to address the situation.

    "We want to see not just that they are offering up ideas, but that they were open to others’ ideas," Dunning says.

    The final step is an interview with the operations managers and floor leaders, during which candidates are again asked about how they would handle different types of situations.

    The process costs "in the four figures" per hire, Dunning says. So far, he believes the investment has been worth it.

    "The amount of time from problem to solution is shorter than I have ever seen it in my 17 years at Chrysler," he says.

    GEMA’s hourly hires are mostly people from small and midsized auto supply shops who are accustomed to taking on several roles at once and solving problems quickly, Dunning says.

    The company has also hired five machinists from North­west Airlines and 12 graduates of Monroe Community College, which is just 14 miles away from the plant.

    The culture of problem solving is evident when walking around the plant. White boards listing issues that need attention are positioned in different corners of the plant floor. Each board shows a chart of when the problem was identified, the status of it and who is working on it.

    Giant electronic screens resembling scoreboards in a sports arena keep a running tab of productivity. These boards, which hang from the ceiling of the plant, indicate in red any machinery parts that are ending their run time and need to be replaced. Most parts don’t last indefinitely, and the boards alert workers so that they can replace them before they malfunction.

    GEMA also has a performance management system that alerts workers to delays or breakdowns in productivity. This information is Web-based and available on computers as well as on a display board in the plant, says Dennis Cocco, president and founder of Activplant, the provider of the performance management system.

    In most plants, he says, only foremen have access to this information, but at GEMA everyone can see where a problem occurs.

    "This supports the culture of empowerment that defines GEMA," Cocco says. "It makes everyone more focused on fixing the problem."

To reward problem solvers, GEMA has a recognition program. Peers can reward one another, and managers can reward teams or individuals. Rewards range from a pizza lunch to American Express gift certificates.

    GEMA also is developing a bonus program for employees who come up with innovative solutions to problems. Such incentive pay is almost unheard of at traditional auto plants.

    "Bonuses will be based on meeting specific performance metrics," Dunning says.

    But the real motivation for workers to be innovative is that it makes their jobs easier, Coventry says. And analysts say he isn’t being trite.

    "In the auto industry, the best motivator you can give workers today is job security," McAlinden says.

Hurdles
    The question remains whether GEMA’s workforce model is replicable. It’s one thing to build a plant from scratch, but it’s a completely different challenge to apply this model to an existing plant, where workers are already accustomed to doing things a certain way, analysts say.

    There is also the concern about whether workers will be able to alternate between day and night shifts on a long-term basis. So far, GEMA’s employees seem to be adjusting. The plant’s turnover is 7 percent, slightly higher than the 5 percent industry average. Its absenteeism rate is 1.1 percent, including vacation and bereavement leave. That is significantly lower than the 14 percent industry average.

    The biggest hurdle for GEMA, though, may be persuading the local UAW chapters throughout the country to accept this new way of doing things.

DaimlerChrysler, for one, is convinced this is the way to go, and it is implementing the GEMA model in new and existing plants as contracts come up for renewal, says Ed Saenz, a DaimlerChrysler spokes­man.

    In April, the automaker signed agreements to use the GEMA model at plants in Ke­nosha, Wisconsin, and Trenton, Michigan.

    "It’s a question of survival," says Bruce Baumhower, president of UAW Local 12 in Toledo, Ohio. He has negotiated for a job classification structure and team approach similar to GEMA’s at a DaimlerChrysler Jeep plant. "To compete, we need to be creative, or we lose our jobs."

Workforce Management, July 17, 2006, p. 1, 20-30 -- Subscribe Now!

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