Something world-class from sleepy East London
Date Released: Tue, 2 July 2013 10:59 +0200
German luxury car-maker thanks local initiative, spontaneity and intelligence for its R2.5bn investment in plant and local workers paying off in terms of productivity and high quality output, writes Ray Hartley.
ON 55 000m² of real estate a stone’s throw from East London’s Buffalo River, 550 orange KUKA robots wait in silence, like extras on the set of a sci-fi movie.
Beneath a nest of blue steel girders, the robot army is being primed to produce the bodies of the new Mercedes-Benz C Class— known in the company as the “W205” — from early next year.
South African vehicle production is about to enter a new era. Human hands will not touch the steel and aluminium parts as they are passed from one robot to another to be welded into shape on a fully automated production line.
Arvid Bamberger, who runs the body shop, has been set the task of producing 100 000 vehicle bodies a year from the new plant — up from the 60 000 currently produced in the existing C Class body shop he runs across the road.
He seems disarmingly cheerful for one who bears such a burden. Then again, he is playing with the best toy set in the country.
“It’s like when you get your new computer. The old one is suddenly slow and obsolete,” he says from behind a pair of plastic safety glasses that catch the lighting in the new factory.
Bamberger’s robots are key to radically improved productivity, which will have to be achieved while meeting rising quality expectations in the cut-throat world of vehicle sales. “We have doubled the number of robots,” he says.
But alongside the robots are the people, who will also be expected to improve productivity while working with new skills in a totally redesigned work environment.
How this will be achieved in East London, situated in one of the country’s least functional provinces and some distance from the country’s industrial centres, is a remarkable story of private and public sector cooperation, strength of will, ingenuity and risk-taking.
The risk to Mercedes-Benz is not small. It has invested some R2.5-billion in the new plant and placed a substantial slice of its global reputation in the hands of East London’s workers and managers.
It is a bet Mercedes-Benz CEO Martin Zimmerman was willing to take because of a matrix of unlikely competitive advantages that the East London operation has built for itself.
“In the mid-1990s, we were marked the worst plant in Daimler, and now we have come to be one of the best,” he says.
Zimmerman runs the company’s operations, which include the East London factory and an extensive dealer network, from Mercedes-Benz South Africa headquarters in Centurion outside Pretoria.
Outside the office is a lake where water birds sun themselves against a winter breeze. The parking lot is an accidental showcase of the marque’s latest models, and the foyer shows off polished examples of the cars the company has produced in South Africa over several decades. The classic rounded shape of the post-war Ponton vies for attention with its increasingly angular and aggressive successors.
If the flurry of online speculation, some of it accompanied by lifelike high-resolution graphics, is anything to go by, the W205 will be even more angular and aggressive.
In such an environment, it takes vigilance not to be overwhelmed by the hype.
But Zimmerman’s case is compelling, more so because he credits the initiative, spontaneity and intelligence of the people who work at the East London plant for the South African operation’s competitive advantage.
He points out that the plant has been rated gold (2012), platinum (2010), gold (2011) and silver (2012) in the highly regarded JD Power survey, which measures “problems per 100 vehicles” – or “PP100” registered by notoriously fussy American consumers.
The gold and silver awards placed the plant first and second in the “Europe and Africa” region. But the platinum award won in 2010 was the plant’s crowning achievement as it is given to the best in all regions, placing East London literally on top of the world. Last week, the plant again won the silver award with 24 PP100.
The revelation that the workers of Mercedes-Benz in East London have achieved a higher quality benchmark than their European counterparts goes against the generally held stereotype.
There are more surprises to follow. East London’s productivity is high by global standards. And its workers take fewer sick days than their European counterparts.
At the heart of the factory’s success lies a plant-level agreement between management and the local chapter of the National Union of Metalworkers of South Africa.
Called “Siyaphambile” — “We are going forward” — the agreement drives up productivity and attendance through what are described as “PBRs” — performance based rewards. Hours and pay are flexible, enabling Mercedes to tailor its labour costs to its output.
Says Zimmerman: “Every worker’s pay is based on that and therefore he shares in the success of the entire plant or — if it’s not the case — he suffers.”
Workers can earn about 20% more if they are productive and keep their absenteeism to a minimum.
Zimmerman says that the result is that “everybody has that quality mindset” and the absenteeism is very low.
“The last few months we have been at 99.3% or 99.4% attendance rate. That is world class, not only within Daimler, but it is world class altogether,” he says.
European attendance rates are about five percentage points lower.
Workers who achieve a 100% attendance record for the year are entered into a draw. The prize is a brand-new C Class. Very few workers make the draw, says Zimmerman, “Because if you are gone for one minute you are marked absent.”
High attendance, which he describes as “very, very precious”, unlocks high performance. “It’s not only a cost factor; it’s also that you have stability. Every day the same team is working on the same thing, so you can really drive performance.”
The robot-dominated body shop delivers the painted vehicle bodies to the assembly plant. Here, human ingenuity takes over. Workers must mix and match seats, interiors, engines, gearboxes, and manage complexity that comes from serving different global markets.
Each vehicle that passes through their hands is different to the previous one. Leftand right-hand drive vehicles are produced. Engines, gearboxes, seats, dashboards and wheels change from one vehicle to the next.
The man in charge of the East London plant is Arno van der Merwe. His brusque, matterof-fact approach does not alter as the subject changes from the production line to what has made the operation tick at a high level.
He credits what he calls the “cross-functional problem-solving” ability of the workforce for East London’s success. There is nothing worse in a modern work environment, he says, than “the hamster effect — just getting on your wheel and running”.
Van der Merwe says that when things go wrong management must take responsibility. It’s an acceptance of responsibility that the South African managers he has encountered are reluctant to make.
“I see a lot of victim-type mentality — ‘It’s the rand, it’s the municipalities’. I don’t think there’s enough focus on our job.”
His approach is simple: “Whatever happens, it’s management’s fault.”
“There’s a lot of ostrich mentality. You cannot be afraid of conflict. The longer you don’t confront it, the bigger it gets. The earlier you get it onto the table, the better. The employees are not the enemy.”
The man he counts on to keep the assembly line running as it processes a myriad bespoke orders is assembly plant manager Gladstone Mtyoko. Bearded, bespectacled and surrounded by electronic boards that tell him how close he is to meeting the day’s output target, Mtyoko is constantly on the move.
He shows me where a team on the assembly line huddles in a nest of whiteboards to solve the day’s problems. Their daily work attendance is recorded using magnetic markers, which resemble green ludo pieces. Mtyoko points to a row of green buttons and, remarks out: “All the members of this team are here.”
Above the line are more electronic displays, which workers consult to see if they are on track to meet the daily target. It is of more than passing interest as their pay depends on success.
The production line works on fixed “takt”, a word that derives from the German “Taktzeit”, literally, “cycle time” Each step has to be completed within a set time, a calculation designed to match the factory output with customer demand.
The metric they are chasing is 40 HPV — hours per vehicle — by 2015. At the moment, the plant produces at 52.8 HPV, a 30% improvement on five years ago. Getting to 40 will take a massive effort.
Next year, the W205 factory will move into continuous production using three eighthour shifts. This will require an even higher level of consistency as there will be no down time which can be used to make up for slow production.
Van der Merwe is acutely aware that the South African operation faces growing global competition. The W205 will be produced in South Africa, the US, Germany and China.
“China is a fierce competitor. South Africa’s future does not lie in competing on labour cost. It’s much more important to develop the skills base.”
South Africa’s advantage lies in the “tenacity” of its workforce and what he describes as “the general culture in the workplace”.
It is a culture that must be built, and prospective employees attend intensive training sessions that plug the gaps in the education system and incubate a mindset of high productivity.
“You cannot just inform somebody about such a system. You have to learn it, you have to live in it, you have to believe in it,” says Zimmerman.
Exiting the plant onto East London’s Settlers Way, you drive about 100m before turning left into an industrial area where Mercedes is preparing the new intake of workers for next year’s new production line.
In a converted warehouse, human resources manager Stephen Goold presides over the training of 800 potential new recruits in the plant’s Shop Floor Skills Centre. They are all school-leavers and about 600 of them will find jobs on the new production line.
Then comes a statistic that brings home the Eastern Cape’s dire employment crisis: the 800 trainee workers were chosen from more than 23 000 applicants. If there is an invisible fuel powering their learning, it is hope. They may be entry-level factory workers, but in this blighted region, they are an elite, the few who have obtained a foothold in a precarious regional economy.
On the day I visit, trainees are testing their ability to follow complex sequences of mechanical instructions. In one corner, a team is taking apart and reassembling the doors of a C Class saloon, in another, they are undoing fastenings they cannot see behind a screen.
In yet another, students write notes furiously as a lecturer brings them up to speed before a whiteboard. Whittling the 23 000 down to 800 gives Mercedes the opportunity to select the very brightest.
“The assessment process means good quality in, good quality out,” says Goold.
Further down the road is the East London Industrial Development Zone, where most of the plant’s component suppliers are based.
From its factories come seats, roof trim, door panels, bearings, exhaust systems, key chassis components, fuel tanks and the pressed “aluminium skin panels” that will be welded together into the body.
Between 45% and 50% of the new C Class will be local, but this includes parts supplied by local component manufacturers, who import some of their parts. The true figure is closer to 25%.
Again, the competition is fierce. Zimmerman points out that South African leather components used to be exported to other Mercedes plants, but more efficient Eastern European competitors have begun to take over.
The South African business environment has its challenges, and its advantages.
With competition so fierce, mistakes count big. If there is an interrupted energy supply, there are severe consequences.
“Any problem on the electricity side and you basically scrap 30 cars. Whatever’s in the paint shop at the time is gone.”
News that Eskom was operating on a 0.5% margin due to its maintenance schedule makes Zimmerman uneasy. “It’s a bit frightening.” On the other hand, government’s support of the automotive industry through the Motor Industry Development Programme and its recent replacement the Automotive Production and Development Programme has kept it globally competitive.
The programme has been criticised as a subsidy that unfairly advantages car-makers to the tune of billions of rands over other industries.
Zimmerman says the programme provides the certainty needed to make big investment decisions. “It offsets the disadvantage of being at the Southern tip of the world far away from many markets.”
The shipment costs to overseas markets are substantial, as are the costs of shipping in heavy components.
And, he points out, 80% of the 100 000 new C Classes produced next year will be exported, earning the country much-needed foreign exchange.
Last year, Mercedes chose Hungary for the production of its new A Class — its first passenger car plant in Eastern Europe.
For now, the East London plant has done the unthinkable. Its competitive advantage is its high-quality output and its productivity. The shelf life of the new C Class model is likely to be six to seven years. Then there is the investment in the paint shop, which has a 20- to 30-year life cycle, which suggests the company is here for the long term.
“We are not negative. Because of our quality focus, we have a unique and, currently, competitive edge — a very strong position.”
By: Ray Hartley
Hartley studied at Rhodes University
Source: Sunday Times