Navistar International TransportationCorp. Indianapolis By John Teresko Dont look for the performance secret in the milling, drilling, turning, broaching, grinding, boring, and honing. At Navistars Indianapolis engine plant, its in the workforce culture. The performance and quality of its diesel-engine production emanates from Navistar people, a tradition born on Feb. 23, 1938, when the plant, under the corporate banner of International Harvester, made its first engine. Until 1964 production was dedicated to gasoline-fueled designs. Today, 7 million engines later, three shifts of 1,511 United Auto Workers International Union (UAW) members are scheduled around the clock, seven days a week, to satisfy a burgeoning demand for high-quality diesels. For employees who are veterans of the late 1970s, the current symptoms of success must be a pleasant contrast. At that time the plant was thrown into turmoil by International Harvesters decision to stop making pickups, the Scout sport utility, and other light-duty vehicles. That decision wiped out a big chunk of the market for the plants engines. "We were producing small gasoline-powered V-8s with cubic inch displacements of 304, 345, and 392 as well as four-cylinder designs displacing 152 and 196 cubic inches," says Howard Miller, plant manager, "and that decision very nearly put us [this plant] out of business." He says rumors of the plant being closed or sold circulated as late as 1981. Miller says the watershed year for the plants business fortunes was 1982. "We partnered with Ford Motor Co. to produce a 6.9-liter diesel for the F-250 and F-350 heavy-duty pickups." Today, 85% of the output of the 1.1-million-sq-ft facility goes to Ford. "For the 1998 model year, 65% of Ford heavy-duty pickup truck buyers have selected the optional Power Stroke diesel engine that we developed and build," says Miller. The Power Stroke turbocharged engine, introduced in 1994, is now available for most Ford F-Series trucks and Econoline commercial vans. "Ford initially expected to need 90,000 of these engines annually from Navistar, but strong truck sales have dictated increased production. When the plant topped the 500,000 mark in total production last year, we were two years ahead of schedule." Miller says the plant is the highest-volume single producer of midrange diesel engines in the industry. "Over the last three years our sales have steadily increased. In 1994 the build rate for our V-8 turbo diesel jumped from 175 a day at the beginning of the year to 540 at years end, then to 720 in 1995, and 820-plus in 1996. "We have increased production nine times in four years, and while output has doubled, hours per unit have been cut in half," he adds. Miller obviously is proud of his peoples performance. "They have confronted phenomenal market growth with incredible productivity in the last five years." Current output is 1,176 engines per day. To meet those production quotas, total employment has grown from 900 in 1994 to 1,600 in 1998 and is continuing to climb, says Miller. "Right now, in Indianapolis, our biggest problem is to continue to grow and add capacity here with limited floor space." Supporting the statistics is the loyalty of Navistar workers, many of them "lifetimers" with a deep commitment to the plants continuing momentum. For example, Roland Rusie Jr., president and chairman of UAW Local 98, is a veteran of 26 years, and Miller has been with the plant since 1969. (The average tenure for all employees is 19 years.) For many, a dedication to the facility has spanned generations. Millers family is an example. His father worked at the engine plant for 33 years, retiring in 1977. And his grandfather began working at the plant shortly after it opened, retiring in the late 1950s. Miller himself began his career with Navistar as an hourly employee in the adjacent Navistar foundry, where the cylinder blocks and heads are cast. He once shoveled sand in the basement, did chill testing, operated an overhead crane pouring iron, and repaired ladles. Recalling those challenges, he quips: "When youre shoveling sand in the basement, theres only one place to go and thats up!" He became an engine assembler in 1971 and then held various management positions, including superintendent of assembly and test in 1983. Millers career progress coincided with the plants growing emphasis on quality. In 1984 he took on the role of product-improvement manager, which involved responsibilities for the plants introduction to statistical process control (SPC). He says that job was one of the positions that best prepared him for his current assignment. "I worked with several of our employees implementing SPC on the shop floor and improving process capability," says Miller. The payoff continues. Navistar has enjoyed Fords Q-1 Preferred Supplier status every year since 1985 and currently ranks as Fords single largest Q-1 supplier. Adds George Leistensnider, manager, quality planning: "Even as our 1997 shipments to Ford represented a 13% increase over 1996, our first-pass yield continued to be 98%, compared to the typical 85% in our industry." Since 1994 the number of engines in repair is down 98.4%, customer-reported defects have decreased by 96.5%, and first-time yield has improved by more than 75%. (By reducing the number of components requiring repair, a plant gains valuable floor space.) What makes those achievements possible is the leadership Miller has demonstrated in communicating with the union membership, says Rusie. "Since hes come on board, weve gained privileged access to all business information. That helps us make rational decisions. Both of us finally realized that a joint effort was necessary if we wanted to counter the fierce competition in the diesel-engine market. If we kept going after each other, the competition would take away our business. Our plant manager has come up through the ranks, and we both want to see this plant continue long after were both gone. We want the business to be here for our new hires and their kids." Navistars emphasis on communication has been formalized in a culture-change initiative called Climate for Performance. In addition to communication, it emphasizes respect for people, customer focus, relentless pursuit of quality, innovation, accountability, speed, simplicity, and agility. A major vehicle for the communication process is a joint leadership committee that meets every two weeks to discuss competitive-improvement strategies and the business decisions necessary to achieve them. Formed in April 1997, the committees mission is to identify a process through which union and management can work together to ensure the plants future. The 18 members are comprised of the plant staff and the UAW bargaining committee -- the two groups charged with premier leadership roles in the facility. "The committee reviews critical business issues, shares company and union goals, and discusses strategies aligned with Navistars current business objectives," says Miller. "Extensive information on quality issues and customer feedback is shared to determine the plants future actions and directions. In some cases, a formal problem-solving joint session is held. The committee also examines ways to maximize capital with prudent investment. It offers recommendations that are responsive to customers and shareholders alike." The joint leadership committee also is the vehicle for benchmarking the competition and developing strategies to exceed their efforts. For example, the committee worked with machining supplier Lamb Technicon Corp. to achieve 85% uptime on the plants transfer lines -- a significant accomplishment that Miller compares with the competitions uptime of 50% to 60%. Process improvement also is driven by individual initiative on the production floor. Miller says 95% of the production tooling represents employee innovations. "Our plant-floor workers, the people who have the intimate relationship with the manufacturing process, perform as asset managers," says Miller. "They know that we must standardize equipment, push for simplicity, and drive out complexity from our business. Both union and management understand that the future depends on joint leadership." Rusie adds, "Our achievements are possible because the company recognizes the employees as a valuable asset." The reduction in hours per unit (hpu) is an important metric of the performance of the Navistar team. "From 1994 to 1997, we reduced hpu by 45% and improved our return on net assets by more than 300%," Miller says. To stay competitive in the next five years the plant is targeting at least a 30% decrease in hours per unit. In the machining area, machine tools and transfer lines mill, drill, turn, broach, grind, bore, and hone the five major engine components. In assembly, the other functional area, the cylinder heads, crankcases, connecting rods, camshafts, and crankshafts come together for final assembly and hot testing. The gray-iron castings arrive on a just-in-time basis from the adjacent Navistar subsidiary, Indianapolis Casting Corp. Operating in a market environment of steadily increasing consumer demand, Navistar has not had the tough problems of confronting staff redundancies when attempting significant productivity gains. Instead, confronted with rocketing market demand, productivity goals are simply driven by the need to satisfy growing customer orders. In addition, Miller says volume increases are carefully planned to coincide with productivity increases. "Even the few times weve been unable to coordinate these events weve kept our hourly workforce in the plant to fill in for employees attending training classes. All this reduces our need for hourly overtime assignments." Although Navistars UAW master contract and the companys guaranteed employment levels agreement allow for "down days," Miller says "we have not had to do that." Another unique dimension of the Navistar/UAW strategy is the reduction in production classifications. "At one time we had more than 60 -- now we have only one," says Miller. Other joint Navistar/UAW strategies include a committee that focuses on outsourcing -- which was one of the thorniest issues in the recent General Motors Corp./UAW strike. To better communicate with a diverse workforce, another committee, a diversity council, has been established to be a sounding board that respects everyones ideas and values, regardless of gender, education, race, or religion. Miller admits hes living in the enviable position that many entrepreneurs can only dream about. "If you were to start a business and make widgets or whatever, youd dream [about] having a product whose success would only be limited by the amount you could make. That can only happen once in a lifetime, and thats what we have here right now." He knows that the success he enjoys ultimately comes from his most important asset, his people.
At A Glance
- Organizational structure built around business teams; each employee on one of 10 teams.
- Production classifications reduced from 60 to one.
- A joint leadership committee of management and union membership meets regularly to discuss business issues.
- 12 benchmarking studies conducted in the last three years.
- Production doubled from 126,000 engines to 290,000 engines in the last three years while hours per unit have been cut in half.
- Production workers participate in process-development efforts (95% of the tooling on the assembly floor represents the efforts of production employees).
- Customer-reported defects reduced by 96.5% in the last three years.
- A 50% reduction in in-plant defect rate in last five years.