Ron Harbour President Harbour Consulting

Flexible Manufacturing

© 2005 Harbour Consulting. All Rights Reserved Harbour Consulting Benchmarking  Cost & Investment  Cost Models  Product Teardowns  Cooperative Studies Harbour Report  North America (1989)  Europe (1996)  Asia (2006)  South America (2007) Performance  MFG Assessment  Lean Implementation  MFG Strategy  Product & Process Design  Product Launch

© 2005 Harbour Consulting. All Rights Reserved Recent Clients

© 2005 Harbour Consulting. All Rights Reserved 2000 Korea 2.7% Korea 3.6% Europe 6.9% Japan 25.3% U.S. 65.2% Europe 6.5% Japan 26.6% U.S. 63.2% Korea 3.8% Europe 6.8% Japan 27.6% U.S. 61.8% Korea 3.8% Europe 7.9% Japan 28.9% U.S. 59.4% (1Q) North American Vehicles Sales (millions) Korea 4.0% Europe 7.5% Japan 30.3% U.S. 58.2% Korea 4.2% Europe 6.0% Japan 32.0% U.S. 57.8% ~19.3

© 2005 Harbour Consulting. All Rights Reserved Vehicle Cost Revenue Domestic Revenue Japanese Revenue Market Pressure Small Cars Midsize Cars Large Cars & Trucks Luxury Cars & SUVs $$$$$ Complexity Profitability Challenges

© 2005 Harbour Consulting. All Rights Reserved 2004 North American Vehicle Assembly Capacity Utilization 8 Plants 25% to 97% 6 Plants 69% to 113% 23 Plants 37% to 120% 30 Plants 8% to 139% 6 Plants 96% to 126% 13 Plants 50% to 130%

© 2005 Harbour Consulting. All Rights Reserved 2004 North American Engine Capacity Utilization 4 Lines 78% to 113% 11 Lines 37% to 140% 9 Lines 57% to 129% 5 Lines 46% to 102% 17 Lines 39% to 178% 6 Lines 71% to 104%

© 2005 Harbour Consulting. All Rights Reserved The Capacity /Flexibility Dilemma  Products/Models are increasing, volume per model is decreasing  GM, Ford market share loss has left numerous plants underutilized  Union labor agreements limit plant closings  Foreign brand growth paced by available capacity  Concurrent Impact on Powertrain, Stamping  Suppliers that aren’t diverse or flexible hurt the most

© 2005 Harbour Consulting. All Rights Reserved Historical Manufacturing Integration Model OEM Production Suppliers

© 2005 Harbour Consulting. All Rights Reserved North American Sourcing OEM Production Tier.5 Tier Two Tier One Trim Assembly Frame Paint Wiring Component Painting Small Stampings Wheel & Tire Suspension, Axle Cockpit Fascia Door Systems Headliner Seats FEM Body Weld Body Paint

© 2005 Harbour Consulting. All Rights Reserved 2004 Stamping Tier 1 Capacity Utilization

© 2005 Harbour Consulting. All Rights Reserved What is Manufacturing Flexibility?  Capable of Building numerous models in one process  Capable of producing multiple architectures/platforms all in a single process  Ability to add a product with minimal disruption, cost, and time  Rapid product mix change  Quick new product launch

© 2005 Harbour Consulting. All Rights Reserved Flexibility Enablers  Similar architecture  Common build sequence  Layout for “flex” manning  Well trained, rotating workforce  Quick part switch  Responsive Suppliers  Capacity must be generic

© 2005 Harbour Consulting. All Rights Reserved Flexibility Examples Welding  Toyota GBL  Nissan IBAS  GM ‘C-Flex’ Metal Stamping  GM Footprint Powertrain  Ford modular flex Assembly  Honda 5 Zone  GM BOP

© 2005 Harbour Consulting. All Rights Reserved Total Enterprise Cooperation  Design- focus on differentiation  Product Engineering - product architecture  Manufacturing Engineering - common process  Manufacturing - discipline to lean tools (standard work, visual controls, etc…)  Purchasing & Logistics- pursue flexible suppliers  Scheduling- discipline to fixed schedule  Finance- separate capital equipment investment from product programs

© 2005 Harbour Consulting. All Rights Reserved The Bottom Line  Flexibility is important for all plants but even more critical for suppliers  Some manufacturers are more effective at low cost flexibility than others- a significant competitive differentiator  Flexibility does not have to cost more money  The winners will be the plants that can handle variety and change quickly from old to new

Ron Harbour President Harbour Consulting