Executive Word -- Don't Leave It To Alan Greenspan

Richard E. Dauch, chairman and CEO of American Axle & Manufacturing Inc., says the economic future is in the hands of the men and women who manage manufacturing in the U.S.

Richard E. Dauch Co-founder, chairman and CEO, American Axle & Manufacturing Inc., Detroit Age: 60 Education: Bachelor's degree in industrial management and science from Purdue University. Career Highlights: 1964: Joined General Motors Corp. as a college-graduate-in-training. 1972: Became Chevrolet's youngest-ever plant manager. 1976: Joined Volkswagen of America as group vice president of manufacturing operations. 1980: Recruited by Lee Iacocca to be Chrysler Corp.'s executive vice president of worldwide manufacturing. 1994: Co-founded American Axle & Manufacturing Inc. by teaming with two investors to purchase General Motors Corp.'s axle, forge and driveshaft driveline assets. Family: Wife, Sandy, and four children.

Vice chairman of the board of directors of the Washington, D.C.-based National Association of Manufacturers, Richard E. Dauch has a blunt message for management. The economic future is in the hands of the men and women who manage manufacturing in the U.S. His company is a success story case in point. For 2002, American Axle & Manufacturing reported record earnings of $176.1 million, up 53% from 2001, on record sales of $3.5 billion, up 12%. IndustryWeek senior editor John S. McClenahen recently talked with Dauch about manufacturing's contribution to the economy. IW: The economic future, you contend, is in the hands of manufacturing executives more than it is in the hands of Chairman Alan Greenspan or anyone else at the Federal Reserve. How so? Dauch: One of the bigger issues right now for our general economy is capital investment. The majority of capital investment is triggered by people who produce things. And if they are not doing that, you're not going to have the [economic] trigger of capital investment. You can have all the [interest] rates up or down you want to by the Fed. [But] that's not going to make the thing move. IW: Why is it that manufacturing executives must take the lead? Dauch: Because in manufacturing you actually create something. You create a product. You create jobs. Services are needed, but you're laundering already-created value. There is no value added, basically, from services. You have got to get to the fundamentals that are the bedrock that holds up our nation's economy. The key to U.S. manufacturing is productivity. And as you relate to productivity there are three co-equal issues: skills development, capital investment and innovation. IW: How have you been able to increase productivity at American Axle & Manufacturing by 50% since 1994? Dauch: People create productivity. In our company, for example, we always first invest in the most important asset we've got, and that is our workforce. We average, per-person, each year over 50 hours of training and skill-set development for our people. [For example] in partnership with local colleges, we do on-site training in all our city locations, anything from basic mathematics to basic English to applied automation, CNC [and] CAD-CAM. We have put in over $125 million into skill-set development for our people since 1994. We're betting a pot on this thing. IW: How has capital investment contributed to your productivity gains? Dauch: The previous owner had severely neglected not only the people but also the infrastructure and the business. We had to have heavy capital investment first of all to stabilize the place, then rebuild it and then to modernize it to world-[class] standards. I found an incredible new technology in Germany [to cut gears out of forged blanks]. It's two-cut and dry, [in contrast] to the five-cut, wet process that I've known for almost 40 years. Immediately, I get rid of oil. And when I get rid of oil, I get rid of smoke, soot and mist. I've given my employees a much cleaner environment, and I've also reduced my costs in the process. IW: And how about innovation's relationship to productivity? Dauch: When I first bought the business from General Motors in 1994, new product sales had been around 3% in the previous four years. Nine years later, we are around 80%. In other words, we have broadened and deepened our product portfolio. I put a brand new technical center in Rochester Hills [Michigan] within 15 months of buying the business. You have to invest up front, if you want to be making money like we are, paying profit share to our people or helping our shareholder have a better stock value. E-mail nominations for Executive Word to Editor-in-Chief Patricia Panchak at [email protected].
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