Lean is Green

To those who understand lean, it’s probably assumed that lean saves energy. If you streamline your process, eliminating steps, then logically, you no longer use the energy involved in those wasteful steps.

            But lean disciples also believe in operating on the basis of facts, not assumptions. Therefore, it’s nice to hear that new academic research confirms that lean can indeed by green.

            The research was conducted by Bo W. Oppenheim, who is both a professor of mechanical engineering at Loyola Marymount University and director of the U.S. Department of Energy Industrial Assessment Center at LMU. It was presented at the recent conference of the Lean Aerospace Initiative. (Oppenheim was unable to attend the conference, so another presenter filled in for him.)

            The presentation demonstrated how one-piece flow takes less time – and therefore uses less energy – than a batch-and-queue system to produce the same quantity of product. It also noted that the negative aspects of inventory include energy wasted on lights, forklifts and heating/cooling for product being stored, as well as the energy used to produce inventory that ultimately is not sold and then requires more energy to transform it into scrap.

            There were other points, none particularly surprising. But perhaps Oppenheim’s most insightful finding was that not only can a lean transformation create huge energy savings as a by-product, but the energy saved by lean “often radically exceeds the savings from equipment optimization alone.”

            Oppenheim’s research will be included in the upcoming 2007 edition of the Encyclopedia of Energy Engineering. In addition, while it’s a bit early for me to go into detail, Productivity Press will be publishing a book in this subject area later this year.

 

            Speaking of green, Ford CEO Alan Mulally just created a new position. He named Susan Cischke, a Ford vice president, as senior vice president for sustainability, environment and safety engineering. She reports directly to him. Part of a new trend?

 

Where the Lean Jobs Are

Would you like to work in healthcare? Would you like to live in Europe, especially eastern Europe? Do you want to work for a large company?

            If you answered yes to any of those questions, and you are a bona fide lean professional, your prospects are pretty good.

            That’s what I learned from talking the other day with Linford Stiles, chairman and CEO of Stiles Associates, an executive search firm specializing in lean positions.

            “We are seeing more and more large organizations getting seriously involved in this,” he told me. Lin explained that, by large, he means companies with revenues in excess of $10 billion – a big jump from the type of companies he used to deal with.

            A related trend, and one that speaks to the nature of the current marketplace, is that Stiles Associates is also doing business with several private investment firms, which want people not for themselves, but for the companies they are purchasing.

            Big companies want people with big skills. “When we first started this back in the 90s, all people would talk to us about was, ‘do (the job candidates) understand the tools – 5S, kaizen, load leveling? Can they spell takt time?” Lin comments. “Right now, much more attention is being put on leadership and culture change. They’re looking for somebody who has had success in making a culture change.”

            And they want proof, he said: “At this level, they want people who can bring with them some evidence of metric improvement – return on assets, return on sales. Now it’s ‘I want to see what it does to profits, not inventory turns.’ They used to talk about things like space reduction. We don’t hear much of that any more.”

            (To some extent, his remarks parallel those of Adam Zak, another headhunter I spoke with last fall.)

            There are increased searches for high-level people, particularly for high-level financial people, such as CFOs – people who understand lean accounting and activity-based costing.

            Demand for people is increasing, Lin said, and his business is booming. There are more candidates in the marketplace now, compared with when he first started, but “the supply is not keeping up with the demand.”

            There are more searches to fill jobs with higher salaries. Whereas three years ago, the average salary for a Stiles Associates search was $130,000, in the first quarter of this year it was $196,000. That means “we’re still doing a lot of $130,000 searches, but we’re also doing a lot of $300,000 searches,” he said.

            Lin is seeing increased demand outside the United States, particularly in Germany, England (though more in services firms there) and Scandinavia.

            He also predicts increased demand over the next five years in eastern Europe – countries such as Poland and Romania. “Right now, (those countries) are just starting to uncork their manufacturing capability,” he said. “Our clients are looking at those countries, setting up plants there, and there is nobody over there that understands lean.”

            Lin is not involved much in Asia, at least partly because in China “they don’t pay anybody enough to make it worth much being a search consultant.”

            His firm is also at the beginning of what he sees as a growing trend, placing experienced lean people into hospitals. Lin is planning a big push for his company into healthcare as a result.

            For companies seeking to hire lean executives, he advises, “Be serious about it. Nothing fails faster than a lack of attention and lack of commitment. Some of these big companies, maybe eight or 10 years ago, they thought they had the whole thing figured out with six sigma. A lot of them are coming to us and saying, ‘well, that didn’t work.’ There seems to be a new level of commitment to do first things first. We have always believed that six sigma is great, but with six sigma, you’re working with little bits, and you have big bits in lean. Do the big bits in lean. We have a lot fewer people coming to us looking for six sigma people.”

            And for job-seekers, he urges, “Make sure that when you talk to these folks (who have a position open), make sure they understand the pitfalls. Make sure they are prepared for something less than instant gratification. I’d be spending a lot of time evaluating the depth of commitment of the people who are talking to me.”

 

Toyota’s Long-Term Thinking on Imports

Will Toyota ever stop importing vehicles into North America?

            I raise that question after reading some statistics in a recent New York Times article, which noted that Toyota is increasing its imports into the United States.

            Imports and exports are not the goal of a lean strategy, which would be to build products as close as possible to your customer, eliminating the waste of transportation. And of course, that is why Toyota has been on a steady and continuing path of building plants in North America.

            But the capacity of those plants doesn’t yet meet North American demand. Toyota sold 2.54 million vehicles in the United States in 2006, and, according to the article, 46 percent of those were imported.

            That percentage was up from figures of 38.4 percent in 2005 and 37 percent in 2004. And it may rise further this year because of what Toyota expects will be a significant increase in sales for the hybrid Prius – which is only made in Japan.

            Toyota has been steadily increasing its capacity to build Camrys in the U.S., since that is the most popular car here. And, not surprisingly, it has cut back on Camry production in Japan. But that cut is being offset by an increase in Prius production.

            It takes time to build new plants. That may be one reason Toyota just announced that it will build Camrys at a Subaru plant in Indiana, which saves it from building another new plant from scratch.

            But at least in my mind, the situation raises some intriguing questions about the long-term thinking at Toyota – which is a company known for long-term thinking.

            Did Toyota recognize that demand here would grow as quickly as it did? Could or should the company have built U.S. plants at a faster pace? Will it ever have enough plants in North America to fully satisfy demand here – or is that not Toyota’s goal?

            What do you think?

            By the way, the Times article quotes an organization called the Level Field Institute, a group founded by retirees of the Detroit automakers, as saying that Toyota accounts for 9 percent of automotive manufacturing jobs in the U.S. and roughly 16 percent of the vehicle market here. Meanwhile, the group says, GM accounts for 29 percent of the jobs and about 24 percent of the market.

            Assuming those figures are accurate, I find that fascinating. The figures mean that GM employs more than three times as many people here as Toyota, but only has 50 percent more market share. I believe that says a great deal about what you can achieve through lean manufacturing methods.

            Don’t get me wrong; I don’t enjoy seeing employees of the Detroit companies lose their jobs. But it’s wrong to paint Toyota as the villain, as some people do, saying it is responsible for the huge decrease in automotive jobs that has occurred in this country. If Toyota is exploiting or taking advantage of anything, it is the inefficiencies of the Detroit companies and their failure, at least at first, to produce high-quality vehicles that provided the greatest value to customers.

 

Lean and the Military’s ‘Plasma Platform’

Our nation’s military forces are facing a crisis. We are in a situation where our ability to provide the kind of top-level defense we want and often need is at risk. And the widespread application of lean principles to military operations – which is taking place, to some extent – is absolutely critical to our future.

            I’m sorry if that sounds a bit melodramatic. But I’ve just returned from the annual conference of the Lean Aerospace Initiative, held last week in Cambridge, Maryland. It was a sobering experience.

LAI, headquartered at and supported by MIT, is a consortium of private companies and the government involved in researching and sharing information about lean strategies. Sharing information is a fundamental lean principle, and the more than 200 people who attended the conference tend to embody that principle.

I’ll be posting several articles about presentations I heard at the event, but I wanted to begin with an overview of what struck me as the most important issues.

            The mood at lean conferences tends to be upbeat, and this one was no different. I guess that’s because lean believers know what it can achieve and tend to be optimistic about prospects for improvement.

            There was plenty of optimism and passion among the speakers. On the military side, Vice Admiral Walter Massenburg, recently retired as commander of the Naval Air Systems Command, described with great enthusiasm his efforts over the past several years to transform naval air operations. Similar energy came from Dale Malone, a civilian who is deputy corporate deployment champion in NAVAIR, as he outlined the remarkably comprehensive effort to turn naval air operations into a lean organization.

            And it wasn’t just the Navy. Colonel Kenneth Moran of the Air Force spoke in detail about what is called D&SWS, or Develop & Sustain Warfighting Systems.

            However, several of the presentations started with the speakers outlining the forces driving lean through the military. And the picture they painted was troubling.

            Much of the equipment used by our armed forces is aging, with planes and ships that are often more than 20 years old. Equipment is expensive, and I’m referring not just to the billions of dollars required for new planes and ships. Simply outfitting our troops costs about $20,000 per soldier. And military leaders project a need for increased troops in the future.

            But right now, the military is stretched to the limit, so every available dollar goes to maintaining operations. Requests for the kind of major funding needed to update and upgrade the military get little support.

            Further, the ever-growing public opposition to our operations in Iraq means the public and the Congress are not in a mood to throw more money at the military. People want to see less money spent, not more.

            As one military speaker at the conference put it, it’s not just a burning platform – it’s a “plasma platform.”

            Some of the best comments at the event came from a non-military speaker: Jim Albaugh, executive vice president of Boeing as well as president and CEO of Boeing’s Integrated Defense Systems division.

            The perfect closing speaker for the conference, Albaugh simply and clearly put it all together.

            “There are too many requirements in the DOD (Department of Defense) and NASA chasing too few dollars,” he said. “I am not bullish on the defense budget. We’re really going to have to tighten our belts.”

            In addition to adopting lean strategies, he also suggested a change in how defense programs are structured. To illustrate his point, he referred to the Army’s Future Weapon Systems program, which carries $18 billion in development costs and isn’t scheduled to actually produce weapons until 2014. That approach will no longer be acceptable, he said, suggesting that instead of holding delivery until an overall program is complete, we should “spiral in the technologies to our current forces as they become available.”

            But that issue aside, the broader reality remains. As Albaugh put it, “you can’t be successful without lean.”

            He didn’t specify whether he was referring to the military or Boeing. But I think it’s clear his statement applies to both.

 

Increasing Market Cap Through Lean

Most lean success stories describe success in terms of operational metrics: the amount of money saved, a reduction in cycle time, an improvement in quality, an increase in throughput, and so on.

            But here’s one that’s a little different: Lean increased the value of the company.

            American Capital Strategies is a Maryland-based buyout fund. The firm recently issued a news release touting all the money they made from buying and then selling companies.

            One of those companies was Iowa Mold Tooling (IMT). American Capital invested in the firm in October 2000, then sold it in the third quarter of 2006 to Oshkosh Truck. The buyout fund realized a gain of $36 million from the sale, which a news release said was equivalent to a 25 percent compounded annual rate of return on the investment.

            And what accounted for the increase in value?

            “This excellent outcome resulted from close collaboration between the IMT deal team and our operations team,” said David Ehrenfest Steinglass, American Capital senior VP, corporate development. “This cross-functional group brought in a new management team that was able to more than double EBITDA in 18 months, through the implementation of lean manufacturing and other operational improvements.”

            American Capital has not succeeded with every manufacturing venture. The same news release also noted that the fund lost $6 million on an investment in Optima Bus Corporation, and lost $29 million on Weber Nickel Technologies, which went into bankruptcy.

            There’s no mention of whether a lean strategy was tried at either of those companies.

 

Healthcare Oversight: Slow-Moving on Improvement

The efforts of many healthcare organizations to adopt improvement strategies is now well-known. But what does one of the industry’s chief overseers have to say about it?

            I’m referring to the Joint Commission, the independent, not-for-profit organization that evaluates and accredits nearly 15,000 healthcare organizations.

            The good news is that the Joint Commission is aware of improvement concepts. The bad news is that awareness is about as far as it goes, at least for now.

            The Commission has a lot to say about performance measurement. It is constantly reviewing and updating its metrics on a wide range of healthcare areas, usually having to do with treatment and care in specific areas. It also issues a Specification Manual National Hospital Quality Measures.

            But setting, or even upgrading quality standards is not the same thing as eliminating waste and working to improve operations.

            On that topic, in the Public Policy section of its website, the Commission has a page discussing Reducing Waste in Health Care and Improving Efficiency. It states:

 

            Waste in health care is vividly apparent, and its potential reduction is actionable at various levels. Opportunity areas include systems redesign in health care organizations, such as through adoption of the Toyota Lean methodology; implementation of electronic health records; placing evidence-based limitations on the deployment and use of new technologies; and payment system reform. Virtually all of these opportunities create corresponding new opportunities to improve patient safety and health care quality. 

 

            Sounds fine. So what is the Commission doing in this area?

            The Waste Reduction and Improving Efficiency initiative will systemically categorize and describe opportunities for waste reduction and improved patient care, identify accountabilities for their pursuit, and frame approaches to measuring success in reducing waste in hospitals and other organized health care delivery settings.

A white paper report addressing Reducing Waste and Improving Efficiency in hospitals and other health care settings will represent the culmination of the Roundtable’s discussions.

            Well, I suppose that’s better than nothing. If the planned white paper leads to the Commission actually setting some standards or endorsing some meaningful approaches, then it might achieve something.

            However, this seems to be a situation where the oversight body – for which quality improvement is clearly a primary goal – is slower-moving and further behind those early adopters in the industry who are starting to achieve real improvement by embracing lean principles. That’s where the real improvement will come from.

 

Boeing Makes Pilot Training Lean

A division of Boeing is adopting a new system for training pilots that embodies some lean principles.

            Boeing, of course, has a long history of pursuing a lean strategy. Its wholly owned subsidiary, Alteon Training, is launching something called the Multi-Crew Pilot Licensing (MPL) program.

            The intent is to train pilots in less time and at less cost than has traditionally been the case.

            According to Marsha Bell, vice president of First Officer Program at Alteon, traditional pilot training has included a requirement that a pilot acquire a certain number of hours of training and flight time.

            Instead, “we encouraged an examination of what needed to be trained, rather than an arbitrary hour figure,” Bell says.

            In another example, training traditionally has focused on a student first becoming proficient as a single pilot in a plane, then as part of a crew. But “that’s not how airlines crew their airplanes,” Bell comments. “This allows a training environment that replicates the flight environment.”

            High demand for pilots is what prompted creation of the MPL program. Boeing projects 35,000 total commercial aircraft worldwide by 2024, meaning airlines will need to employ more than 17,000 jet-ready pilots each year. In China alone, Boeing projects a 264 percent fleet growth over the next 20 years.

            Initially, six students are being trained under an MPL beta program at facilities in Australia, with another six planned soon. The first batch of qualified pilots – actually, they are being trained as first officers – is expected by next January.

            Bell says the new program eliminates much of the “learning and unlearning” of traditional methods.

            While lean is apparently not part of the MPL vocabulary, the streamlining of the process certainly sounds a lot like a lean approach, as does the willingness to go beyond traditional methods – which Bell says have been in place for more than 60 years.

            By the way, technology is also a key part of the new approach. Simulators have become so realistic, according to Bell, that training now includes about 75 percent less time in actual airplanes than in the past, and a graduate’s first flight will actually be on an airplane with passengers.

Microsoft Needs Some Lessons in Lean

I could only shake my head in sadness and disbelief at a story this week about Microsoft.

            This long-time producer of one of the most widely used consumer products – the Windows operating system – ought to, by now, have a better appreciation of what constitutes value from a customer’s point of view and the waste involved in not getting it right the first time.

            Instead, we get this:

SAN FRANCISCO (Reuters) - Microsoft Corp. warned of four security flaws in its software that it categorized as 'critical' on Tuesday that could allow attackers to gain control of a user's computer.

Microsoft, whose Windows operating system runs some 95 percent of the world's computers, issued the patches as part of its monthly security bulletin.

The world's biggest software maker defines a flaw as 'critical' when it could allow a damaging Internet worm to replicate without the user's doing anything to the machine.

The company said the 'critical' patches fixed three holes in its Windows operating system and another in its Content Management Server product. Microsoft also issued another security update for Windows it rated at the lower threat level of 'important.'

The fixes come a little more than a week after it released a patch outside of the regular monthly update to plug a security hole related to an animated cursor that hackers had used to launch attacks after users clicked on links to malicious Web sites.

The company has been working to improve the security and reliability of its software as more and more malicious software target weaknesses in Windows and other Microsoft software.

            Why doesn’t a company as business-savvy as Microsoft see the costs and wastes involved in constantly having to issue patches to fix problems that never should have existed in the first place? Not to mention the ill will that keeps growing among its customers as a result of those problems.

 

            I’m tempted to send them a copy of our book Lean Software Strategies: Proven Techniques for Managers and Developers. But I’m not convinced anyone there would actually read it.

 

A $2,500 Car

Can an auto company, by improving processes through a lean strategy, manufacture a car that can be sold profitably for $2,500?

            In the United States, the short answer is no. (More on that in a moment.) But in India, Tata Motors – India’s largest commercial vehicle maker – is attempting to do exactly that.

            It won’t be easy. Tata’s cheapest Indian vehicle currently is a small truck that sells for $5,100, so the new plan means cutting that price in half.

            An intriguing article in the April 16 issue of Forbes describes how Tata has reinvented itself over the past seven years since the Indian government began allowing foreign competitors to sell in the country. The change has been dramatic; in 2000 Tata lost $110 million, but in the quarter ending December 2006, the company earned $116 million on revenue of $1.55 billion.

            Lean has clearly been a key factor. The article, written by Robyn Meredith, notes:

 

            Workers at the Tata Motors factory have been trained in Japanese manufacturing techniques that call for continuous improvement. A worker building Safaris noticed that each day on average, one front grille was ruined when a worked leaned over to work on the engine and accidentally scratched the grille with his belt buckle. Cost: about 2,500 rupees – $57 – a day, or $17,000 a year. Tata designed a simple protective cover for the grilles, plus a slip-on fabric cover for belts and watches that is now used to cut down on expensive waste at each of Tata Motors’ factories. Cost: about 25 cents per vehicle.

 

            The article also notes that it now takes between 12 and 15 minutes to change a die on the passenger car assembly line at Tata, down from two hours in 2000. And the article quotes author and lean guru Jeffrey Liker as saying he is very impressed with Tata.

            However, for me the most interesting point is why Tata has decided to build a $2,500 car, which is scheduled to go on sale next year.

            The decision resulted from Tata executives doing something the article says they had never done before: they talked to customers.

            They did so because they were curious whether there might be a market for a car designed to compete with the three-wheeled motorized rickshaws that are widely used in India. Also, they had been surprised when the $5,100 truck, first offered for sale in May 2005, became a gigantic hit, selling 100,000 units in 20 months.

(The Indian market for motor vehicles is much less mature than the U.S. market, with far fewer cars per capita.)

By speaking to customers, the Tata executives identified a huge pent-up demand, not only because a four-wheeled car would be a better vehicle, but because it would represent a big leap in status for the rickshaw drivers, who are looked down on in Indian society.

            Here we have a company embracing two fundamental lean concepts: seeking to understand what value is from the customer’s perspective, and recognizing that the market, not the manufacturer, sets the price.

            The new, still unnamed car is planned primarily for India, though it might also be sold in other poor markets in Africa, Southeast Asia and maybe eastern Europe and Latin America.

            It probably won’t be sold in the U.S. Forbes quotes consultants at Roland Berger as estimating that it would cost as much as $4,000 on top of Tata’s $2,500 price to engineer the car to meet U.S. safety and emission regulations, transport, pay tariffs, market it, pay lawyers and other warranties.

            And while $6,500 would still be lower than even the cheapest new car currently sold in the U.S. – the $10,560 Korean-made Chevrolet Aveo – it would then be competing with vehicles from America’s vast used-car market, where $6,500 can buy some pretty nice wheels.

            What will the $2,500 get an Indian buyer? While there are no pictures yet, the article makes it sound like this will be a small, bare-bones vehicle. (It brings to mind the Datsun 710 I drove more than 30 years ago.) I suspect it will be a car that not many Americans would want to drive. But for the Indian market, it may be the right product at the right time – and a lean approach is clearly helping make it possible.

 

David Mann: Use the Process to Drive Behavior

The right process does more than produce goods with the least waste. It drives the right behavior. And sometimes driving behavior is the main point.

            That’s the lesson to be learned from a good discussion on Mark Graban’s Lean Blog, featuring comments by David Mann, author of Creating a Lean Culture: Tools to Sustain Lean Conversions.

            Mark began the discussion with an earlier post discussing efforts within healthcare to reduce hospital infections – which frequently occur because people simply do not wash their hands.

            So how do you get people to wash their hands? Yell at them? Spy on them? Not if you really want to change behavior.

            Mark’s post prompted good comments from a variety of people. His second posting including numerous specific suggestions from David Mann, including better education of employees, visual controls to instruct people and a process for allowing people to anonymously report offenders.

            We can all express exasperation at the way people disregard the most fundamental practices of good health, such as washing hands, but David’s approach is more practical. Set up the processes that change the behavior. Eventually, it will become second nature, and having the processes will be less important (though still a good idea).

            People do dumb things. It’s frustrating, but the best approach is: Don’t get mad. Fix it.

 

            By the way, my thanks to Mark for his post about Seth Godin’s misuse of the word kanban, and Seth’s subsequent (and gracious) updating of his comments after I sent him an email.

Pursuing Lean in a Competitive Market

“Lean Manufacturing is Revolutionizing the North American HVAC Circulator Pump Industry.”

            That is the heading on a news release from Research and Markets, an international marketing research firm. The release promotes a new report from Frost & Sullivan providing an overview of this niche market.

            I don’t know whether “revolutionizing” is a correct description. However, based on the news release, the detailed report (which costs several thousand dollars) describes an industry that is ideal for the application of lean principles.

            It’s a small industry; the North American market for heating, ventilating and air-conditioning circulator pumps generated revenues of $144.2 million in 2004.

            But while growth is forecast for the industry, the market for the pumps “is highly competitive with very little room to differentiate among competing product,” the release states. “Manufacturers are challenged to improve production methods to minimize manufacturing costs in order to reduce price.”

            They are doing just that, the release says, adding, “The manufacturers can succeed in the market by expanding their product offerings to provide different accessories along with the pumps while reducing their overhead costs.”

            Isn’t this the type of thing lean experts have been saying for years?

            If any of you have this type of experience – using a lean strategy to gain advantage in a competitive market, whether it be pumps or anything else – post a comment and let us hear about it.

 

Lean Railroading, Part III

I’ve previously written about how railroads are beginning to apply lean principles to reduce the time cars spend in classification yards being switched among trains, and to reduce the time those cars spend being maintained.

Now comes a story detailing how preventive maintenance is being adopted so that the cars don’t break down in the first place.

The source is a nice article about Bombardier in the April 9 issue of Forbes, which also contains articles I previously mentioned discussing Chrysler and GM.

            Perhaps best known in this country as an aerospace manufacturer, Bombardier is also a key player in building and maintaining rail systems. The article, written by Kerry Dolan, suggests that a lean revolution is beginning within at least some rail systems.

            Part of it has to do with manufacturing, and the article gives credit to Bombardier president Andre Navarri for introducing lean manufacturing and a just-in-time inventory control system into its operations.

            But beyond that, the article indicates that a rail version of total productive maintenance is gaining ground in rail operations.

            The article actually refers to “predictive maintenance” and “anticipative maintenance.” (I suspect that latter term was created by the writer.)

            An example is a description of how railway engineers at an operations control center in the English city of Derby use Bombardier’s maintenance system, branded Orbita. They spend time studying four large wall-mounted computer screens displaying data on 33 Scottish trains run by First ScotRail.

 

            If something gets in the way of the door – a person’s foot or a roof panel that’s hanging down – the electric motor that closes the train door has to work harder and produces more current. Orbita measures the extra current and relays that information to the engineers at master control. If the door motor is working overtime all afternoon long, for example, they see a tall red bar on a chart. First ScotRail’s maintenance staff is then advised there’s a problem with a particular door on a particular train.

 

            While the article emphasizes Bombardier’s increased use of technology, it’s also clear that applying that technology in ways consistent with lean principles – such as making sure maintenance occurs before a part fails – is at the heart of what the company is doing.

            A consultant is quoted in the story as suggesting that, for a variety of reasons, rail companies are at least a decade behind aerospace and automotive companies in adopting lean strategies. Bombardier is clearly moving into the future.

 

Good and Bad Ideas About Detroit

While much has been written about the Detroit automakers, and the possible sale of Chrysler in particular, a recent issue of Forbes contains both some of the best and some of the worst ideas put forward on this topic. I believe their articles are worth mentioning because what’s being said relates to lean principles.

            First, the worst. The magazine published a brief interview with Glenn Reynolds of CreditSights, who is described as a longtime auto analyst. (His firm is described as one that analyzes corporate capital structures.) Reynolds proposes that Chrysler become a joint venture owned by Daimler, General Motors and a group of private equity players.

            With such a deal, Reynolds says, “GM could control the rationalization of the North American auto industry.”

            Oh, really? I think market forces, such as the strength of the Japanese companies, have a bit more to do with it.

            Forbes, noting that GM already has too many dealers, brands and exposure to a tough market, asks whether there is a case for GM’s getting involved with Chrysler at all. Reynolds responds:

 

            The stock and credit markets will hate it. That said, there are a number of very good reasons. GM could drive a steady and orchestrated restructuring of the industry. GM also could work over the longer time horizon to consolidate many dealers. While GM would be unlikely to admit it for regulatory reasons, GM could also better influence market pricing and production planning.

 

            I think he’s right about the reaction of the stock and credit markets, and that’s because they have more sense than he does. GM’s influence on market pricing is minimal, if it exists at all. And while GM is making progress in its own restructuring, it is far from being at the point where it could take over another troubled company and turn around both Chrysler and itself.

            Fortunately, on the very next page of the magazine, automotive columnist Jerry Flint offers a refreshing dose of common sense.

            Flint doesn’t write about the possible sale of Chrysler here. He focuses on GM’s turnaround efforts. He writes:

 

            Cutting costs isn’t turning around; reducing the dollar losses isn’t turning around; and even moving to the financial black from the red isn’t turning around.

            Turning around means selling more cars and trucks instead of fewer cars and trucks. It’s making volume gains over the year before. It’s gaining market share instead of losing market share.

 

            (I’d argue that market share is less important than profitability, but we’ll debate that another time.)

While Flint gives GM credit for its improvement efforts, including showing a profit, he adds,

           

            It’s too early to say GM has turned the corner. Wait three months.

 

            Funny how there is no mention of sales or profits in Reynolds’ remarks on the preceding page.

            So what does all this have to do with lean? The relentless drive for continuous improvement demonstrated for so long by Toyota is not just about improving operations and cutting costs. It’s about adding value for the customer. That’s something Detroit executives tend to forget.

            Toyota doesn’t strive just to make its processes more efficient. It engages in incredible market research to set directions for new products, something I’ve written about before. Its processes for product creation, described in our book The Toyota Product Development System, are just as important as its production system.

            By the way, since its publication, that book has consistently been one of our best-sellers. Let’s hope executives in Detroit are among the people buying it.