Donnelly Corp. said it will bring its money-losing European operations back to profitability next year as it shifts to a lean production system.
To reduce a high defect rate and cut costs, Donnelly is introducing a Toyota-style lean production system to plants in Ireland, France, Spain and Germany.
Last November, the US-based maker of rear-view mirrors and windows transferred four top executives to Europe to manage the turnaround.
The European plants are 'at best' only 5 to 15 percent converted from traditional mass production to lean manufacturing, said Russell Scaffede, senior vice president of global manufacturing. Three of Donnelly's seven North American plants are mostly converted to lean production; the remaining plants are 30 to 40 percent converted.
Scaffede, one of the Donnelly executives transferred to Europe, said plant workers typically need five to 10 years of experience before they can fully understand Toyota-style lean manufacturing.
European suppliers are several years behind North America in the shift to lean production, he said. That's because Japanese automakers with operations in North America have forced US suppliers to learn lean production.
But Scaffede expects European companies to catch up fast. 'Once they get confidence, they'll get every bit as good as we are, maybe better,' he said.
One measure of improvement is the defect rate. In North America, that rate is expected to drop to 165 defects per million by the year end, down from 1,200 parts per million in 1995. European defect rates are still about 1,300 parts per million, but Donnelly hopes to reduce defects to 500 parts per million in the next 18 months.
Some Donnelly plants in Europe are already profitable, with both Irish plants close to break-even. But Donnelly still must fix its Hohe unit, a German mirror maker acquired in 1995. Said Scaffede: 'They certainly sense the need to change, but there is much resistance.'