Stay connected

Get the latest insights into Canadian business


Back on the road

By Bernard Simon | June 18, 2013
Back on the road

Chrysler Canada Inc. and its Detroit-based parent were on their knees four years ago. Hobbled by inefficient plants, lack-lustre vehicles and a heavy debt burden, the car maker lost $16.8-billion (U.S.) in 2008.

The challenge

Two previous owners – Daimler AG of Germany and New York hedge fund Cerberus Capital Management – had tried and failed to reinvigorate the company. Daimler treated Chrysler like a poor cousin, wary of sharing its best technology and reluctant to accept ideas from the North American unit. Cerberus fared no better, antagonizing suppliers, dealers and employees as it sought to slash costs.

Fiat SpA of Italy took control of Chrysler as part of a U.S. and Canadian government bailout in 2009. It faced the daunting task of overcoming a legacy of neglect and mistrust without the luxury of abundant financial resources. So dire was Chrysler’s plight that all its assembly plants, including its Canadian operations in the Ontario cities of Windsor and Brampton, were closed as it went through a court-ordered restructuring.

But the Italians had one important advantage: Everyone knew that if they failed, Chrysler was doomed.

The strategy

Fiat’s revival plan for Chrysler hinged on spurring collaboration between the two car makers. Its main weapon was – and still is – Fiat’s World Class Manufacturing (WCM) system. Developed by Hajime Yamashina, a professor of mechanical engineering at Kyoto University in Japan, WCM comprises 10 “pillars,” including safety, customer service, cost controls, maintenance, “focused” improvement and people development. Performance is audited twice a year.

“When we started WCM, we had a lot of fear at first,” says Marcel Breault, who was the Windsor plant manager in 2009 and is now in charge of implementing WCM in Canada. A critical element in overcoming that fear was to involve workers more closely in solving problems. “We did a poor job in the past in giving recognition,” Breault says. “Every employee just likes a handshake or a pat on the back that says job well done. You have to develop a trust with your work force to understand what their issues are, and they have to understand what our issues are, and to collaborate on what is best for the company, for the plant and for them.”

Breault spent five hours a day on the shop floor. “I was basically coaching and mentoring through the day,” he recalls. Some changes were complex, such as cutting a layer of management at the plant level to improve communication. Others were as simple as changing the height at which production-line workers did their jobs, so that they could stand straight rather than bent over. Plant workers now have more autonomy to fix problems on the assembly line. Labour classifications have been consolidated to allow more flexible use of production teams.
“I wanted to better understand their problems so they knew I was concerned and I had some passion and rigour to fix the problems,” Breault says. “As they saw us fixing problems and issues, they got to be more engaged in the process of working toward eliminating waste.” Outside the plants, Chrysler also listens more closely to the concerns of dealers and suppliers. It allows dealers to keep lower inventories of new vehicles

The results

The fruits of the Fiat-Chrysler partnership have far surpassed expectations. Buoyed by imaginative new models and improved quality, Chrysler has grown the fastest among the Detroit car makers. Sales in Canada jumped almost 50 per cent between 2009 and 2012. In some months, including February of 2013, Chrysler has been the top-selling car maker north of the border. Burgeoning sales have enabled Chrysler Canada to boost its work force to more than 10,300 in March of 2013 from 8,600 at the time of Fiat’s takeover, including the addition of more than 1,000 unionized jobs.

Chrysler workers (about one-fifth of them in Canada) submitted a total of 368,000 written suggestions for improvement in 2012, equal to almost 10 per employee. The Windsor minivan plant was the first in North America to achieve bronze status, one of four performance grades under the WCM grading system (silver, gold and world class are the others). The plant has lifted output to 1,490 minivans a day last year from 1,426 minivans in 2009 without any increase in production-line speed, and with fewer people. Breault is confident the rate will exceed 1,500 this year.

Some Chrysler employees have been assigned to Fiat plants in Europe to swap information on best practices. Breault notes: “As the professor [Yamashina] said, ‘If you can copy some of the best practices, don’t spend the time on trying to redesign and redevelop. Just copy.’”

The United Auto Workers and Canadian Auto Workers unions have turned an old training centre in Plymouth, Mich., into a World Class Manufacturing academy. Workers from various plants are encouraged to share ideas and to return later to show others how they have applied what they learned.

The future

The highest accolade for any car assembly plant is a mandate to build a new model. Such mandates typically mean hundreds of millions of dollars in new investment, and many new jobs for local communities. Plants within the same company compete fiercely for new models. Chrysler’s Windsor plant aims to become the first in North America to gain WCM silver status, putting it in a strong position for a new product mandate.

The pressure for even closer collaboration between management and workers is unlikely to abate, especially given Fiat’s challenges in the oversupplied European market. Glenn Russette, Director of Human Resources at Chrysler Canada, cautions that “while the industry and Canada have demonstrated some improvements to date, those gains have been modest and it is critical that we not return to an uncompetitive state.”

The content of this field is kept private and will not be shown publicly.
About PwC Canada Hide Footer