Auto Parts Quality Slipping High Rejection Rates What Happened

[Mark Gregory]

I was speaking with a fellow the other day in Ontario , Canada near one of the big 3 auto plants . He told me that all the US auto manufacturers here have a 3rd party do quality control inspections on all the parts  before assembly . The parts are made in Mexico , USA and Canada . The rejection rates are not like 5% rejected but numbers like 40% - 50% . Mexico had less rejection than Canada . When I was young they used to say that all the car companies liked our skilled work force in Ontario . It costs money to ship the rejects up here then throw them in the scrap . What has happened ? ?

[51dyno]

The third party workers are more than likely contract workers who receive very little benefits and limited wages. saving the auto industry big bucks on labor and more for the top as a bonus.

[Xander Wildeisen]

How do you save when you throw stuff away?

[Joe in Canada]

3 hours ago, Mark Gregory said:

I was speaking with a fellow the other day in Ontario , Canada near one of the big 3 auto plants . He told me that all the US auto manufacturers here have a 3rd party do quality control inspections on all the parts  before assembly . The parts are made in Mexico , USA and Canada . The rejection rates are not like 5% rejected but numbers like 40% - 50% . Mexico had less rejection than Canada . When I was young they used to say that all the car companies liked our skilled work force in Ontario . It costs money to ship the rejects up here then throw them in the scrap . What has happened ? ?

That is not correct. They only do a 100% quality check on a part that has a known issues. The problem may have been found in house first at the tier one manufacturer. Then if finding reject  parts in their shipping warehouse they would inspect parts at the customer's facility.  Having an outsource company like Greely or Pic that are certified to perform such work costs the tier one manufacturer a very great expense. It would be extremely rare to find even a percentage of even 5% reject. Building 60 cars an hour, with five cars rejected  every 100 cars they would never keep up with the repair at that rate and we are talking only one part.

  If the rejected part is found by the customer then it is a different ball game with a cost recovery and a PRR may be issued. All stock may be diverted to a service warehouse with 100% inspection. With a recorded breaking point and a determined length of inspection time set by the customer. Containment inspection will last when the customer has the confidence of the venders work again.  If found at the customer's facility would have an impact on their PPM parts per million count and could affect future contracts.

 I do know of a US tier one company had a tier two company in China that switched to a less expensive small rubber hose material with no engineering change. The product was rejected by the customer with over a million dollars in the system and in transit. China walked away and changed their name  leaving the tier one to foot the bill. That is extremely rare.

I think someone is pulling your leg.  Most sorts on the average find no or very very few rejects and if they ever did find 50% the world would come to an end for the vender.

Edited September 26, 2016 by Joe in Canada (see edit history)

[plymouthcranbrook]

We have a standing joke here that if the parts you buy are made in the "Good" side of China you probably will be alright, but if in the "Bad" side you might be in trouble. Good in our context is nearer the ocean, Bad further into the interior.  Just a joke here but we have found more "Out of the Box" parts failing sooner or not even working when they are removed from the carton than in the past.  Like all companies some in China are ethical some are not.

[Larry Schramm]

On ‎9‎/‎25‎/‎2016 at 8:43 PM, Mark Gregory said:

I was speaking with a fellow the other day in Ontario , Canada near one of the big 3 auto plants . He told me that all the US auto manufacturers here have a 3rd party do quality control inspections on all the parts  before assembly . The parts are made in Mexico , USA and Canada . The rejection rates are not like 5% rejected but numbers like 40% - 50% . Mexico had less rejection than Canada . When I was young they used to say that all the car companies liked our skilled work force in Ontario . It costs money to ship the rejects up here then throw them in the scrap . What has happened ? ?

 

Not true.  I work for a tier 1 supplier and I can count on one hand the rejected parts from the plant this YEAR and still have lots of fingers left over.  And even then, the part is under evaluation and no problem was not found with the part and it is undergoing further testing.

 

50 years ago 5% might have been thought fine, but today everyone is targeting failures in parts per million.  Other wise known as 6 Sigma.

Edited September 27, 2016 by Larry Schramm (see edit history)

[Mark Gregory]

Joe and Larry this is what i thought the quality should be with todays CNC machines , computers , etc . i will ask again what exactly is going on here . I was told the parts range from arm rests to hot and cold stamped parts . Thanks for everyones responses I was still hoping we can still make something in North America without so much parts rejection .

[Rusty_OToole]

They were doing better than that in American plants a hundred years ago. Henry Leland in particular, was very strong on precision work and quality control. He wanted every part perfect and he got it. He described a trip he made to England, and a visit to a luxury car maker that specialized in hand fitting everything. Their engine plant was 4 times as big as his Cadillac plant and employed 5 times as many workmen, yet their output was 15 engines per day and his was 250. His theory was that it was cheaper to invest in the tooling, and take the trouble to do everything right in the first place. He was right, his ideas took over the industry.

 

Years later Edward Deming wrote his management books inspired by Detroit industry. The Japanese took up his ideas and soon were selling high quality low cost products around the world.

 

It sounds like today's managers think they are concentrating on the bottom line, but they don't know where the bottom line is.

Edited September 28, 2016 by Rusty_OToole (see edit history)

[Amphicar BUYER]

I used to work for a company called "Exabyte" here in Colorado. During the 90s we were the gold standard for our products (8mm tape backup systems)  that all other companies strives for. The way we got there was because Peter Behrent (founder) said "Make your employees happy, they will make a happy product, that will make a happy customer and that in turn will make a happy company, which makes the employees happy..." With that in mind we were the only company of our size in high tech that actually had no debt and $20mil in the bank when other companies were leveraged into obscurity.

 

I spent 13 months in the hospital due to a mis-diagnosis by a Dr. I got my 66% disability payments from my insurance, and Exabyte (on their own and in secret) made sure my paychecks were 100%. Not only that but I accrued sick and vacation time while in the hospital! (I took every Friday off for over a year) My office was even locked up as if a time capsule, coffee cup still where I left it!  They hired a temp to take over while I was gone. Upon my return he was hired full time in another capacity rather than tossing him out with the garbage as most companies would do now. Another lady's son was in a horrific car wreck, they gave her 5 months off with 100% pay and also accrued sick and vacation time too. This is but 2 of many things they did "off the books" for good employees. That right there is why the employees were so happy. The company cared for all of us as long as you did your job and gave back with professionalism and dedication. 

 

Peter retired and within 2 years after the CFO took over, all the benefits deemed non-essential were cut, shortcuts were initiated into manufacturing process, employee's happiness was removed from the list of essentials. Customer service was moved over-seas (resulted in the fasted drop of happy customers ever!) Failure rates went from <1% to almost 90% on some lines. Our company went from buying other companies and a waiting line of years to work there, to bankrupt and bought for assets by a much smaller company we were in the process of buying just months before. The CFO had no problem driving his new Mercedes to work they day they laid of 1400 of us. He also hired an armed guard to stand by it that day.

 

Business has lost sight of where the actual bottom line is and how to improve it. They only care about investors and neglect the employees that make the company. It is not investors that make it work, it's the employees!

[Rusty_OToole]

Reminds me of a local tree surgeon company that sold out to a bigger competitor. First thing they did was cut everyone's pay. The best workers left, and were snapped up quickly by operators who knew them. The bums stayed. Within a year the whole place was in a mess, losing customers, losing money etc. The guy who built up the company told me "it took me twenty years to put together the best crew in the business and they threw it all away in six months". Less than 2 years after the takeover, the company that bought them out went bust.

 

The trouble is business school educated executives have no problem running a business into the ground as long as they get their money.

 

By the way if I was an investor I would not be pleased to see the company run into the ground and my money disappearing. It's not genuine investors, it's thinly disguised crooks and chisellers who would rather wreck a company for a quick buck than do the work to run it properly.

 

Watch "The Big Short" to see what happens when the biggest banks in the country are run on the 'get rich quick' system.

Edited September 28, 2016 by Rusty_OToole (see edit history)

[ejboyd5]

There is hardly anything more frustrating than using your skill to diagnose a problem down to a particular part, replace that part and then have the problem reappear because the replacement item is itself faulty.  I have experienced this enough in recent years (particularly with electrical components) to know that it is not an isolated or rare event.  It certainly takes the satisfaction out of otherwise quality work when you have to question the serviceability of every part you receive in its factory boxing.  

[padgett]

"I felt about as good as anybody would, sitting in a capsule on top of a rocket that were both built by the lowest bidder."

 

When a company gets in trouble, the first thing to go is R&D, the second is QA.

[Larry Schramm]

2 hours ago, padgett said:

"I felt about as good as anybody would, sitting in a capsule on top of a rocket that were both built by the lowest bidder."

 

When a company gets in trouble, the first thing to go is R&D, the second is QA.

 

Not true,  Usually the first to go is maintenance, then the rest. 

 

If you want to know how well a company is doing, go to the bath/ rest rooms and see how clean they are. 

 

Spotless, business is good.  Bad shape, business is going down.

[jackofalltrades70]

9 minutes ago, Larry Schramm said:

 

Not true,  Usually the first to go is maintenance, then the rest. 

 

If you want to know how well a company is doing, go to the bath/ rest rooms and see how clean they are. 

 

Spotless, business is good.  Bad shape, business is going down.

 

I preach this constantly at our facility and clean up in the restroom when I see things amiss.  The condition of a single restroom can tell you a "World" about where you are.

[plymouthcranbrook]

A big change I have seen in Corporate philosophy is that in those thrilling days of yesteryear companies often planned for a far off future, making decisions that could and often did affect production years in the future. Today I see the mantra seems to be"How much can we make today"  Never satisfied with a good profit and a secure business they often go for the big money today with absolute no worries about anything but that(often based on stock prices).  I have run into some companies where the company slogan must be" Screw the customer one time real good"  If he/she never comes back who cares.  Along with many other changes in "Modern" society it has become more prevalent each day.

[Xander Wildeisen]

I would make a comment, but I have to go and clean the bathroom now.

[C Carl]

This is what happens when conditions are created that nurture a systemic "race to the bottom".  - Carl

[Rusty_OToole]

Amphicar buyer how long did the CFO keep his job after the new management took over? Or did he get a golden parachute so big he didn't care?

[C Carl]

Speaking of golden parachutes , this is a golden opportunity to throw out an automotive anchor line for a moment. John , that mental image of the armed guard protecting the new M-B on layoff day begs clarification for a guy who has a couple 'Benzes laced in with his Cadillacs : So about what year was that new beauty ? Being a car guy , do you recall the model ? E class with a potent V8 ? Big S class ? Nice new R129 if late 90s - early 2000s , which might even have been a big bad V-12 SL600? I do mean this semi-seriously as momentary distraction from the gruesome reality of the decline of our fair country. It doesn't take long to kick something apart , but to rebuild something is another matter. Remember as a kid listening to the old folk talking about the "good old days" ? Now we are them doing that too. But this time it's for real.  - Carl

[Xander Wildeisen]

What is a golden parachute?

[39BuickEight]

A golden parachute is sort of like a buyout.  It guarantees an executive that, should his or her employment end, for whatever reason (usually not including their own illegal or immoral actions), they are guaranteed a certain amount of money. 

[Amphicar BUYER]

6 hours ago, Rusty_OToole said:

Amphicar buyer how long did the CFO keep his job after the new management took over? Or did he get a golden parachute so big he didn't care?

 

It was about a year or so before we closed the doors permanently.  From 1500 employees to 0 in months. Many of us still are friends. In fact I work with a lady I used to work with at Exabyte 20 years ago. It was a very close family at "The Byte"

[Amphicar BUYER]

5 hours ago, C Carl said:

Speaking of golden parachutes , this is a golden opportunity to throw out an automotive anchor line for a moment. John , that mental image of the armed guard protecting the new M-B on layoff day begs clarification for a guy who has a couple 'Benzes laced in with his Cadillacs : So about what year was that new beauty ? Being a car guy , do you recall the model ? E class with a potent V8 ? Big S class ? Nice new R129 if late 90s - early 2000s , which might even have been a big bad V-12 SL600? I do mean this semi-seriously as momentary distraction from the gruesome reality of the decline of our fair country. It doesn't take long to kick something apart , but to rebuild something is another matter. Remember as a kid listening to the old folk talking about the "good old days" ? Now we are them doing that too. But this time it's for real.  - Carl

 

As I recall it was the SL600, Black with tan interior. This was 2006

 

I happen to have some Benzes ('79 450SL and '96 SL500) with my Cadillacs (66 Ragtop, 2x '72 ragtops) and a Lincoln MKT for my daily too.

[Xander Wildeisen]

1 hour ago, 39BuickEight said:

A golden parachute is sort of like a buyout.  It guarantees an executive that, should his or her employment end, for whatever reason (usually not including their own illegal or immoral actions), they are guaranteed a certain amount of money. 

Why would companies guaranty a person so much money if their employment were to end? Are the executives that good, that in order to get them hired. Companies have to offer so much? Some of these chutes seem a little large. You would think a person would want to get fired, and go fishing.

[39BuickEight]

1 hour ago, Xander Wildeisen said:

Why would companies guaranty a person so much money if their employment were to end? Are the executives that good, that in order to get them hired. Companies have to offer so much? Some of these chutes seem a little large. You would think a person would want to get fired, and go fishing.

Well, if they get fired, then they often don't get the money, depending on why they got fired.  It usually applies when a company gets taken over or something like that.

[C Carl]

And sometimes , "X" , when those "parachutes" are deployed , there can be aspects of "rats leaving a sinking ship" , if I can mix metaphors. - Carl

[Xander Wildeisen]

Well said Carl, and you may mix metaphors. But it is not my hand in the cookie jar.

[C Carl]

Thanks , John for the "image enhancement" ! A brand spankin' new '06 SL600 ! "It shooda been ME, drivin' that......." But yeah , those 2nd series SL500s are among the finest cars ever built. Probably the biggest bargain for the buck on wheels today. Just bottomed out  on the price curve , gonna head up. Potentially up , and up , and up , and up. They are starting to differentiate , with the still very good ones , and the ones headed to the recycle heap. Look at other SLs. And compare what an R129 is. Andrew Noakes (do you have his definitive book on SLs ?) , justifiably calls them "The Quantum Leap". A 190SL ? Huh ? Come on. No offense to anyone , but back to back , ignoring monetary factors , an R129 SL500 , particularly 2nd or 3rd series vs. a puny (again , no offense) 190SL ? With a swing axle ? Yeah , they are cute , O.K. , but I am sure you have days you have NO CHOICE  : you just HAVE to drive your SL500 , right ? Now , are you hip to '07 and '08 E550s ? If God condemned me to an eternity in just one of my cars , that would be it. Still depreciating , get one now anyway. They are pretty rare cars , but you can still find a very low mileage one , in house maintained , some still on extended warranty. Take THAT for a daily driver ! Also , do you want to talk about cheap , simple , jaw dropping handling enhancement on your FWD Eldo ? Those big things are an astonishingly sophisticated platform capable of handling beyond the ability of , say 1 in 5000 to drive them. But you have to get rid of the whitewalls. Starting to sound like a rant.  - Carl

 

 

 

 

[Rusty_OToole]

It could be the CFO negotiated a VERY generous severance package with the buyers or perhaps they had to buy out his contract. I am being a cynic here, suspecting he ran the company into the ground to make the bottom line look good temporarily, in order to get a better price for the company, knowing he would be retired on his private island in the Aegean while the hourly employees were standing in the unemployment line.

 

Without a scenario like that it is hard to understand why he would destroy the company when he could have kept running it at a generous salary until he retired.

 

Sort of like a shop keeper burning down the building for the insurance, except it wasn't his building.

Edited September 29, 2016 by Rusty_OToole (see edit history)

[Amphicar BUYER]

The CFO always complained the Peter was doing too much for the employees and not enough for the investors. Peter looked to the future, the CFO looked to the right now. Typical CFO, only looking at the $$$ and wanting it all now. 

 

So 1500 employees and their families and the suppliers, the contract workers, the customers and so on all lost out on a long term success. There were a ot of us (not me, bad timing by a week or so) that made significant $$ in our stock options. We made the best product of its type in the world, bar none. It was the "Gold standard" for the industry. 

 

Hi package was never announced so you may be right, but knowing Peter I don't think he would allow the company he started in his garage and grew to 1500 employees within 5 years to die for the benefit of the CFO. Tragic at best.

[capngrog]

Current American commerce is plagued by an over-abundance of MBAs!  In my previous life, I worked with many and, with very few exceptions, I found them to be an unexceptional lot of pompous mediocrity.  My experiences resulted in my succinctly explaining the ills of modern American commerce thusly:  "Modern management has forgotten, or was never taught, that the PRODUCT LINE is what makes the BOTTOM LINE possible." 

 

Just sayin',

Grog