GENERAL MOTORS PASSENGER CAR SHEET METAL DIE CONSTRUCTION WORKLOADS TOTAL REQUIREMENTS DIE CONSTRUCTION 61 62 63 64 65 66 67 68 69 70 This chart indicates the 1961 through 1970 requirements of General Motors domestic car divisions and All references to die-construction and tooling years in this statement relate to specific yearly models and not calendar years. Because of the leadtimes between the tool and manufacturing sequences, model year tooling precedes the same calendar year by approximately 12 years. This chart shows the GM die-construction workload, as related to our passenger car sheet metal parts. The chart covers 10 model years, 1961 through 1970, indicating the comparative workload relationship. On the horizontal scale we have the model years 1961 through 1970. The vertical scale shows the total passenger car die-construction load, in terms of man-hours. The upper line of this chart traces the fluctuating levels of our total requirements over the 10 model years for passenger cars sheet metal die construction. The broken line which runs horizontally through this total requirements line represents the 10-year average of our total requirements or such sheet metal die construction. The lower line on the chart shows the amount of passenger car sheet metal die construction performed by General Motors inhouse during the same 10 years, and the lower broken line represents the average of those inhouse workloads of the sheet metal die construction over the 10-year period. The area between the upper broken line, representing average total requirements, and the inhouse lower broken line shows the 10-year average workload contracted by General Motors to outside die-construction job shops. Thus, the chart shows that slightly more than half of our total requirements for passenger car sheet metal die construction has been performed inhouse, while slightly under half of the workload has been given to outside job shops. I would again like to emphasize at this point that we are discussing in connection with this chart die construction for outer and inner panels and other sheet metal parts for General Motors passenger cars. This represents approximately 75 to 80 percent of our average annual die-construction needs for all purposes. The data on which the chart is based apply only to our five car divisions and Fisher Body Division. Collectively, these divisions have by far the major amount of GM's in-house die-construction capacity. All the remaining GM divisions have only a small amount of die-construction capacity. As you trace the chart from left to right, or from the 1961 model year to the 1970 model year, you will note the fluctuations in our total die-construction requirements. Part of this is attributable to the introduction of new models in various years, as well as the increase in total models offered to meet competition and changing consumer demand. At the present time, for example, we are building 160 different models, which is more than double the number of models we ›roduced in 1959. Another important factor is the cyclical nature of car manufacturing. This results from changes in the economy, fluctuations and shifts in consumer demand for various types of cars and varying preferences in spending priorities of customers. The chart also clearly demonstrates that General Motors has not expanded its participation in sheet metal die construction. Our inhouse workload has fluctuated only slightly from the 10-year average in-house workload. Also, our in-house workload has declinedalthough to a lesser degree-when our total requirements have declined. This is particularly noticeable in connection with our 1970 model die-construction program, which was discussed at your hearings last month. Our 1970 in-house workload dropped sharply-approximately comparable to the drop in total requirements. Of course, the work contracted to outside job shops also dropped, but, as the chart shows, we shared in this decline in workloads. The 1961 and 1965 model years were years of major change. In 1961, we had a new large car and a new compact car and a Corvair station wagon. In 1965, we had a new large car program. For the 1968 model year, the outside die-construction load was more than double that of 1964. The chart also shows that in the 1967, 1968, and 1969 model years our total die-construction requirements were above the 10-year average. Most of these increased requirements went to the outside job shops, as the GM in-house workloads fluctuated only slightly above the 10-year average. This is further evidence of the fact that General Motors is not moving in the direction of retaining a larger percentage of its die-construction in-house. The sheet metal die construction performed by outside job shops for General Motors has been larger in volume in the second half of this 10-year period than during the 1961 through 1964 model years. In general, the volume given by GM to the outside shops since the 1965 model year has been well over the 10-year average for outside die construction for our passenger car sheet metal. In fact, the 1970 outside die construction dipped only slightly below the 10-year average for outside shops. We gave almost all of the workload increase over this period to outside shops even though we had added a stamping plant at Kalamazoo, Mich., which included a die shop. In this connection, I should explain that a die construction and maintenance facility is an integral part of a stamping plant, and there is no hidden significance in establishing one. It is necessary to have skilled dieworkers in each production sheet metal stamping plant in order to maintain die repair throughout the production year and to make necessary die adjustments during the tryout period of new dies. This personnel can also be used for construction of new dies during certain time periods of the model year. One factor cited by outside job shop operators in discussing our inhouse die-construction capacity is our new die facility recently completed by Chevrolet at Flint, Mich. Some concern has been expressed about our adding this capacity. In view of this, I think it merits some discussion. A major factor in Chevrolet's decision was the division's inability to obtain sufficient die-construction hours in outside shops. During the 1965-69 model years, as our first chart indicated, outside die construction was sharply higher than in the 3 previous years shown on the chart. This was attributable only to distinctive hood, fender, and bumper styling all of which benefited the outside shops. During this period of model proliferation to meet competitive needs and customer preferences, Chevrolet expanded its outside die-construction hours. Historically, Chevrolet has relied on independent shops in the Michigan area to absorb almost all of the increased requirements. In fact, the Flint stamping plants reached the point where they were dependent on outside shops for slightly more than double the hours of construction for the 1967 model than for the 1959 model. Thus, it was only where outside sources became inadequate that the decision was made to increase Chevrolet's in-house die-construction capacity in Flint. One factor in the inability of shops to meet Chevrolet's needs was the substantial decrease in skilled labor. A Chevrolet survey of several area tool-and-die shops indicated the independent shops were not able to train enough people to replace normal attrition, let alone the additions required for any additional capacity. In this connection, General Motors has for many years maintained extensive apprentice training programs and on-the-job training programs for diemaking and other skilled trades classifications for its own needs. GM has a total of approximately 15,000 such employees in training, including an estimated 7,650 in tooling activities. Our training programs are based upon our projections of our long-term needs. We do not expect the outside shops to train dieworkers for us. It may be true that some individuals switch employment from outside shops to automotive shops. It is also true that some of our graduated apprentices leave our plants to work in outside job shops because they offer higher rates, more overtime or both. I would like to make a final point relative to the new ChevroletFlint die facility. The added capacity attributable to this operation was substantially overestimated in testimony last month. While some new capacity is being added, the facility will also consolidate some existing die construction capacity located in other Chevrolet plants. The space previously used in the other plants for die construction uses will be converted to other uses. The addition of our diemaking capacity at Flint will not even match the accumulated increase in our total die requirements resulting from the normal growth pattern of the industrty. It was said in testimony before you last month that our new Chevrolet-Flint facility would increase our in-house participation in die construction requirements. This facility has started production but will not reach its anticipated full work level until the 1972 model year. On the basis of our forecasts of forward tooling programs, we anticipate that even with this facility in operation the amount of die construction work that we will handle in-house for the 1972 program will approximately equal our 10-year-average share of total requirements, as shown on our 1961-70 chart. In testimony heard by the subcommittee last month, there was much discussion of how much in-house die construction capacity the automobile industry should have. Job shop operators generally took the position that automobile manufacturers had overestimated their needs and had overbuilt their die construction capacity. We cannot agree with these assumptions. There are several factors-well known to all within the industry— which must figure in reaching a sound business judgment on establishing added die construction capacity. These factors are not unique to General Motors, and I would like to review them. As noted earlier in connection with our Kalamazoo plant, die construction capability is an integral part of a stamping facility. This is a general practice in the industry. Beyond this, management must consider a variety of factors in estimating the most efficient capacity level. At one extreme, the point at which the auto manufacturer has no die construction or repair capacity, total potential operating costs are at a maximum. The other extreme, 100-percent capacity internally to produce dies, is equally inefficient. Because of the cyclical nature of tooling requirements, the manufacturer would find himself in the latter instance with unused capacity in all but peak years. Therefore, the optimum level is someplace between these points. In measuring this optimum point, we consider the fact that we have a continuing need for die repair, die maintenance, die rework for modifications for subsequent model years and engineering changes in current dies and die tryout. We gain efficiency and minimize cost if we have capacity to accommodate these needs. Also, we must consider timing-whether outside shops would be able to meet tight deadlines or difficult leadtime requirements. As noted in the discussion of Chevrolet-Flint-we must also consider whether outside tooling facilities, adequate to do certain jobs, are available. A major and obvious consideration, of course, is the probable cost 32-579-69-10 in any given instance of in-house tooling compared to that of outside supplier. However, cost is not the final overriding consideration. First, I would like to interject, by this I mean, in each case where a decision to place tooling inside or outside is necessary, the relative cost of the die is not the only and overriding determinant. Delivery date is a good example of a factor that may cause us to choose a more expensive route for that die. However, in the larger picture, this more costly die may be the least expensive way to go. Late tooling leads to poor startup of new model production and many related and expensive problems. These factors in many cases so far offset the die cost difference that a route which is financially more is in fact less expensive in the overall. As I said before, decisions to establish die construction in-house versus outside are arrived at only after consideration of all of the above factors. Good managerial judgment is required-giving full consideration to obligations to our own employees and requirements to meet production schedules, model change and plant rearrangement timetables. As to the proposals by some outside shop operators that auto industry capacity should be used only for residual die construction that could not be handled by job shops, this would tend to increase automobile costs. The industry would have to invest in inefficient standby capacity that would be used only in peak years and would be idle in other years. This same consideration does not apply to outside job shops. They are not solely dependent on automotive tooling programs-as our internal diemaking facilities are to keep their shops and equipment busy. In fact, they testified before this subcommittee that automobile tooling historically has accounted for only one-third of the total dollar volume of their business. Thus, it would appear that they normally would have the capability to fill in with other work. We, of course, cannot assume to prescribe for the independent tool and die companies. Nevertheless, from our knowledge of the problems, some comments may be in order at this point. As I said earlier, the automobile industry is cyclical in nature. It would seem that the tool and diemaking shops that wish to participate in the tooling programs of our industry should recognize that this cyclical nature is one of the accompanying risks that are matched by its opportunities. Obviously no business can be fully insulated from the risks involved. However, the problems of these companies cannot properly be related exclusively to the tooling business. they obtain from the automobile companies. That is, a judicious balancing of their total business including the two-thirds not attributable to the automobile companies-would appear to be an appropriate means to provide some protection. Our second chart also demonstrates that in the years since 1954, we have made no effort to increase our in-house capabilities by increasing diemaking and associated personnel out of proportion to the growth in our total employment. (The chart referred to follows:) |