ITT AUTOMOTIVE

GLOBAL MANUFACTURING STRATEGY (1994)

Group 5
Ajay Chaudhary

PGP06004

Rashid Masood

PGP06042

Vishnu Chandran

PGP06056

Harshit Keshari

PGP06077

Varun Chandel

PGP06110

Gaurav Shukla

PGP06132

FLOW OF PRESENTATION
About ITT Automotive
What is ABS?
ABS Industry Outlook
MK20 Project

Concept
Simultaneous Engineering
Design for Manufacturability
Modularity

Manufacturing Strategy for MK20

Facilities
Standardization
Automation
Imminent Issues

Questions & Recommendations

ITT AUTOMOTIVE
$3.5 billion global company headquartered in Auburn Hills,
Michigan
Owned by ITT Corporation, a $23 billion US conglomerate
Divided into eight automotive product groups:-

Brake systems
Wiper systems
Fluid handling systems
Precision die castings
Structural components
Switches & lamps
Electric motors
Aftermarket

ITT CORPORATION
ITT Automotive

ITT Automotive
North America
Michigan

ITT Automotive
Europe
Frankfurt,
Germany

ITT-Teves
Frankfurt

ITT-TEVES - BACKGROUND
Headed by Professor Klaus Lederer
Worlds leading supplier of four-wheel passenger car ABS and
TCS in 1993
Designed & engineered new brake and traction control systems
Produced anti-lock brakes, TCS, and total brake systems
In 1993:- Shipped $2.9 billion four-wheel ABS and TCS
Combined sales of $1.1 billion
Only automotive parts supplier ever to achieve the feat

ABS TECHNOLOGY
First automobile ABS introduced by Bosch in 1984
Computer-controlled brakes to improve a vehicles stopping
capabilities in emergencies
Prevents wheel lock and allows the driver to steer in control
Parts:- An electric motor
A hydraulic fluid pump
A valve block
A microprocessor controller
A wire harness
Wheel sensor assemblies

ANTI-LOCK BRAKING SYSTEM (ABS) - SCHEMATIC

ORIGIN & EVOLUTION OF ITT AUTOMOTIVE ABS

1984
MK2

1990
MK4

1993
MK4-G

1994
MK4-Gi

ABS INDUSTRY OUTLOOK

In 1984

ABS Industry Market Share in 1994

Total market of DM 300

million
In 1994
Market grew to DM 6.9
billion

13%
27%

7%

14%

17%

22%

ITT_Teves
Bosch
Delco
Kelsey-Hayes
Bendix
Others

ABS INDUSTRY CHARACTERISTICS

Slow growth of market share

Long-term contracts with OEMs
Large-market vehicles required 400,000 units of ABS per year
Small-market vehicles needed < 50,000 units annually
ABS supplier produces a prototype
If an OEM enters into a contract, then further development of system is
initiated
The ABS supplier margins were getting reduced each year (6% in 1994)
OEMs gained leverage over suppliers
Average return margins of component manufacturers fell from 5%
(1987) to 1.5% (1991)
OEMs valued product performance, price, size and the ability to match
customer needs

MK20 CONCEPT
The basic concept was to keep the functionality that
MK4-Gi had.
But to make it more smaller, lighter and
cheaper
As said by Max Seirmann, Ninety % of this
project was about getting costs down

The goal was also meet market demands as

European customer set strict targets for the MK20.
The time line for development has thus
come down to 2 years

SIMULTANEOUS ENGINEERING
Design and manufacturing to go parallel to save time
To achieve this Jochen Burgdorf (CE & GM of engineering)
brought people of design, Engineering, Manufacturing and
Quality together.
Interaction and communication increased giving way to
easier flow of information to speed up the process
R&D and manufacturing came together. Designing and
testing was done simultaneously

DESIGN FOR MANUFACTURABILITY

Comple
xity of
design
made
the
valve
block
more
suscept
ible to
proble
ms
Pump and valves,
electronics with hydraulic
controls

Fewer
Parts(
130
from
180)

Integr
ation

No
screw
or
seals,
compo
nents
punch
ed
directl
y into
orifice
s

MODULAR DESIGN
Concept of modularity was used to design MK20,i.e. it could be
constructed out of independent, interchangeable components
Benefits = Customer requirement( ) but components (Constant) with
costs (
)
ITT could easily produce 6 different types of MK20 systems with one type
of pump, 2 valve block sizes and three possible motors.
The dimension shrank and weighed around 40% less
The MK20 was designed to accommodate future changes and company
hope to use 50% of MK20 equipment in next gen ABS
Trade off between customization and standardization (earlier 25 versions
of MK4 were produced)

MANUFACTURING
STRATEGY FOR THE MK20

Company restructured in
1992
Efforts to cut labour costs
in response to customer
demands for lower cost
products

Manufacturing of highly
labour intensive or
unsophisticated products
outside Germany
Announced plans to
manufacture in Portugal,
Hungary, China

MK20- highly
sophisticated product
requiring high operator
skill
Final assembly of MK20
cannot be performed in
low-wage countries.

FACILITIES AND CAPACITY

Expected sale of 25 million MK20 units in the products life
Production of MK20 in all 4 of its existing ABS plants
Initial production in October 1994 and first shipment delivered in January 1995
3 month lag allowed time to ramp-up and solve any unexpected problem
Frankfurt -> Morganton -> Asheville -> Mechelen
MK20 assembly equipment would be purchased and installed in modules (1 million ABS
units)

STANDARDIZED PROCESS
TECHNOLOGY
Same assembly process in all the plants
Allow the company to source globally
More efficient utlization of capacity
Shifitng of capacity by moving equipment
No worry about having different problems at each
site

WHY AUTOMATION
Flexible routine system
MK 20 would require 50% fewer operators than more labour
intensive process used for MK4
Automated process First time yield - 98%, second time yield
99.7% compared to 87-88 % first time yield of manual
process
25% of the capital equipment costs for the MK4 were related
to quality assurance, which was unnecessary in automated
process
Starting up with Manual process was as complex as starting
up with automated process because of differences in design
of MK-20 and previous ABS

IMMINENT ISSUES
The Morganton plant:
No scope for customization (Customers preferred their own dedicated
manufacturing lines)
Quality Assurance (Variability in supplier quality in US and Europe )
Advanced Technical support needed for automated process
(approximately 50% more)
Fully automated equipment (including material handling, conveyors)
would not be a reusable investment
Implementation of Kaizen program(A continuous improvement system)
will stop making progress
Asheville plant:
No need to replace Labour intensive jobs with automated processes (nonunion environment, labour cost 20$/hour, single culture, single language)
Plant manager was not comfortable with laying off the current workforce

QUESTIONS & RECOMMENDATIONS

IF YOU AUTOMATE, YOU STAGNATE

A critical aspect of manufacturing MK20 is high level automation
Opinions are divided among the incumbents of company in terms of extent of automation
Those in favors have rationale:
Automation leads to standardization thus consistency in quality
Replacement of human operators thus reduction in manual labor cost (35$-50$ per Labor)
Direct impact (reduction) on the operation/production time
Capacity can be transferred based on the demand at various geographies

Those who oppose the automation have the rationale:

Every vehicle is different hence standardization of a critical component will be an issue
Automation will bring the job cuts (Dickerson)
The defects/million in supplies in Germany vis--vis USA is not consistent (5000/Mil. Germany, 50000/Mil. USA)
This will employ huge manual checks for each ABS system produced hence will ultimately increase workload

Thus on the basis of both the comments we can say the following:
The ABS requires constant variation/modification hence standardization may not be the best option
Looking at huge difference in the labor cost & raw material variation automation at all geographies will do more harm
than good
Hence until the benefits hugely outweigh the cost of setup & operation automation at all geographies should not be
done or it may stagnate the growth of the company

SAME PROCESS TECHNOLOGY ACROSS ALL THE PLANTS?

Pros of standardizing the process:
Automation will allow to source globally
Production can be done anywhere globally based on capacity available
Shifting of excess capacity by moving equipment from one plant to another
Will allow ITT to run preproduction & thus dont have to invest in varying the production capacity
Manual labor cost will be reduced

Cons of standardizing the process:

The process will move towards automation hence will lead to job cuts
There is significant difference b/w the quality of materials supplied by supplier in Germany & USA
Extra finished product verification/checking cost will be incurred
High level of technological knowhow is needed to optimize the operation so as downfall of one unit wont effect entire
process
Manufacturing process complexity will increase

Thus looking at both Pros & cons the opinion is:

Looking at high volume & reduction in production cost the plants in Europe (Frankfurt & Mechelen) should go for
standardization
In USA (Morganton, Asheville) the process can work in semiautomatic state as cost & quality will not reduce significantly
Hence difference in cost structure, quality change & consumer requirements should be considered while implimenting
standardization globally

DICKERSONS VIEWPOINT
Automation - Implications
Variables

Frankfurt

Ashville

Labour
cost

$30-35 per hour

$20 per hour

Work
Culture

Diverse &
Multilingual

Single culture &

language

Labour
Union

Intensive

Nil

Kaizen implementation has

significantly improved productivity
(30%)

High Setup Costs

Loss in Flexibility
MK4 invited 3000 changes in 94
Attaches premium to these tweaks
Loss of Evolutionary Product
Cost reduction of 5% achieved will be offset by loss in
sales

Recommendations

Utilize mixed process

Organize processes into consumer-specific modules
Dedicate one cell to each module
Improve processes via Kaizen

A consistent decline in rejects from 4% to

2%

RECOMMENDED STRATEGY BY LEDERER

Rationale for ITT Automotive will hinge on the same line of thought as
providing a twin version strategy for three main reasons:
From a broader strategic perspective, the adaption of the MK20 to suit
American markets would allow for testing the scalability of the MK20
Platform. However, automation should be exercised in Frankfurt.
From an organizational perspective, the twin version strategy would
allow for a gradual organizational processes change as compared to the
single version strategy.
Further, the twin version strategy allows for both top-line and middleline improvement for bottom-line improvement while at the same time,
not alleviating attrition, which is a challenge in industries relying on
skilled labour.

THANK YOU