About four years ago, US-based automakers began planning for and investing in a new manufacturing era that would build on flexible plant processes and usher in more fuel-efficient ‘green’ vehicles.
Investment in plants and flexible manufacturing has been significant, despite a weakened US economy. Importantly, US president Barack Obama’s administration has been actively funding green initiatives and fuelling alternative energy interests. While the goal is to lessen US dependence on foreign oil, the government role is tantamount to an auto rescue.
As a result, automakers are jump-starting plant construction and renovation plans, spurred by federal funds. US government auto industry rescue funds reached $110bn last year. The government has also invested billions of dollars in automotive projects for alternative energy development since President Obama took office in 2009, as well as $700bn in Troubled Asset Relief Program (TARP) funds for distressed companies.
Among domestic car manufacturers, Ford has focused its new portfolio on a crop of hybrid and electric-powered vehicles, in a move that points to the future direction of the company by utilising federal, state and private funds. Financially the healthiest of the ‘big three’ US automakers, the company now sells the Ford, Lincoln, Mercury and Volvo brands, and also has a 13% stake in Mazda Motor Corp.
The firm hit US paydirt in February when it outsold GM for the first time since 1998 and led domestics in US sales. Although it took no federal bailout funds, Ford was awarded $5.9bn in loans last June from the US Department of Energy (DOE), as part of its Advanced Technology Vehicles Manufacturing Incentive.
The loans call for Ford to transform plants across Illinois, Kentucky, Michigan, Missouri and Ohio to produce 13 more fuel-efficient models in the coming years. As a result, Ford president and CEO Alan Mulally says: “We plan to invest nearly $14bn in advanced technology vehicles in the next seven years. Our partnership with the DOE will also help retool our US plants more quickly to produce fuel-efficient vehicles and help meet the new, rigorous fuel-economy requirements.”
Other makers to benefit from $8bn in DOE alternative energy funds last June were Nissan North America, Tesla Motors and Fisker Automotive – all had plans to bring all-electric vehicles to US markets.
One of the first Ford plants to use advanced assembly processes is Michigan Assembly in Wayne, a converted Ford truck plant that uses the Ford Production System based on global flexible assembly. “The construction and tooling process will continue for the next several months,” said Ford spokesperson Marcey Evans in March.
Ford invested $550m to transform the former Michigan truck plant into the new high-tech operation. There, workers will build the new Ford Focus for North American markets later this year. The former site of Ford Expedition and Lincoln Navigator trucks is converting to small car lines. The Focus pure battery electric vehicle (EV) and a plug-in hybrid EV also will launch there in 2012. In January, at Detroit’s North American International Auto Show, Ford chairman Bill Ford Jr announced the company will invest an additional $450m in Michigan to push its aggressive EV plans.
Detroit rival General Motors also is heeding the call to develop alternative energy vehicles, namely its extended range, Volt. GM emerged from bankruptcy in July last year and considered its future amid a time of great uncertainty and change for the global auto industry. The new GM had a new majority stakeowner, the federal government, which holds a 61% interest, a stake it held even before conditional loans of about $50bn were made.
To operate in a leaner manner and reduce costs, GM has made flexible manufacturing a priority across its plants. Flexible manufacturing is fully integrated under the Global Manufacturing System (GMS). “GMS is the common manufacturing system in use across all plants globally – no exceptions. It has transformed the assembly process and permeates the entire fabric of work. It’s a basic way of life here and is based on continuous improvement,” says Ken Knight, executive director of GMS in Detroit, a former plant manager in Canada (Oshawa) and Lansing, Michigan, facilities.
Mr Knight adds: “Flexible manufacturing is more important than ever as we strive to meet ever-changing market demands. Shortening the time to market is a key benefit of flexibility and is essential to building a thriving enterprise. Manufacturing facilities are no longer rigidly dedicated to single product designs.”
GM officials would not disclose investments made in flexible manufacturing and virtual build, but, Mr Knight says: “It would be correct to understand that we don’t spend on GMS for the sake of GMS. Rather, we use the principles of GMS to guide the way we design our products, tools and processes, saving on investment through the reduction of waste.”
But one report says that GM stands to save about $1.5bn a year from GMS’s global production methods.
GM is investing about $700m in eight Michigan facilities for Chevrolet Volt production, including Michigan’s Detroit-Hamtramck plant. Hamtramck is positioned under GMS to produce Volt, which will see a first small production run of about 5000 units later this year. It will ramp up in 2011-12 to produce some 50,000 Volts annually. “Hamtramck continues to advance its skills in applying GMS and [is] fully engaged in preparing for Volt production in Q4 of this year,” Mr Knight says.
The 65-kilometre range Volt can run for several hundred kilometres after its gas engine takes over once the electric battery is depleted. The federal government gave GM about $241m to launch the combined electric gas engine vehicle. Its lithium ion battery packs are assembled at GM’s Brownstown Assembly in Michigan. The $43m battery packaging facility opened on January 7 and is the first US-based battery assembly plant.
Chrysler Group, based in Auburn Hills, Michigan, now operates under the direction of Chrysler-Fiat CEO Sergio Marchionne. Bankruptcy proceedings ended last June; since then the new Chrysler intends to repay $7.1bn in conditional loans. A Chrysler spokesperson says: “We will fully pay back the US TARP and Canadian loans [by] 2014.”
Despite reports to the contrary, Chrysler’s multiphase electrification projects continue. Last November, the group’s extended-range electric vehicle (ENVI) scheme was suspended. But a broader electrification effort is under way, absorbing the ENVI team into vehicle and product development groups, says a Chrysler spokesperson. The company’s five-year vehicle electrification strategy includes traditional hybrids, plug-ins and all-electrics, a spokesperson says.
“ENVI quickly developed the technology to get us up to speed and then those vehicle electrification programmes were absorbed into normal vehicle development and powertrain operations, showing our intent to bring EVs to market,” the spokesperson says. “We do have plans for late 2011 and early 2012 but commercial applications are our focus now.”
DOE and Treasury funds for US advanced energy projects since 2009
- $2.4bn for advanced battery manufacturing and EV development. Various projects aimed at the US ‘big three’ and suppliers.
- $8bn into loans for advanced technology vehicles to Ford, Nissan Tesla, Fisker Automotive.
- $315m in clean cities projects, includes coalition of private and public groups.
- $600m for bio refineries pilot projects.
- $700 bn committed TARP funds for troubled industries, primarily financial and auto.