Raising productivity bar: Output by Ford’s well-travelled SA workers tops Africa, Asia/Pacific

Jeff Nemeth - Ford Motor Co

It’s easily forgotten that while GM and Chrysler would have gone to the wall in 2009 had the US Government not bailed them out. But the house that Henry Ford built did not need to beg for State support. Ford Motor Company is justifiably proud of that – and its 90 year history of producing its cars in South Africa. Last month the worldwide CEO Alan Mulally visited the country to celebrate that milestone and see how a fresh R3.4bn investment was working out. His trip coincided with the ending of an industry-wide strike, and Ford’s highest ever monthly market share since returning in 1994. The group is in the country to stay, uses innovative ideas (including foreign travel for hourly paid workers) to improve labour productivity; and says its SA plant is the most productive in the Africa, Asia/Pacific region. Lessons aplenty from this interview with Ford SA’s head Jeff Nemeth. – AH     

To watch this CNBC Power Lunch video click here

ALEC HOGG:  Ford Motor Company of South Africa sold 47,000 vehicles in 2012 and captured round about 11 percent of the market.  They’re very excited about this because Ford used to be number one in the country.  It then slid off the radar pretty much when they disinvested, but it’s coming back with a bang and in fact, the September figures were the best ever for Ford.  We asked Jeff Nemeth, the Chief Executive and President of Ford Southern Africa to come into our studios and have a little chat about the legacy, whether they are staying in this country, and what they’re doing about labour relations.  It’s a terrific interview.

JEFF NEMETH:  We’re very proud of our history here.  In fact, the first vehicle that Ford brought into South Africa was in 1904 – only one year after we were incorporated.  We started production here in 1923, so we’re celebrating our 90th year of production here in South Africa this year.

ALEC HOGG:   And regaining market share…

JEFF NEMETH:  Well absolutely, we were leaders back in the 60’s/70’s and then during the 80’s we pulled out with the sanctions.  We then came back in the 90’s and since then we’ve grown steadily up to the point where, in September we were at 12.2 percent market share, which is the highest we’ve been since ’94 – and up 50 percent over the last year.

ALEC HOGG:   New products…

JEFF NEMETH:  Yes, very much so – on the back of great products.  We’ve launched not only the Ranger a couple of years ago, but we’ve really increased production, we’ve put a second shift on, and we’re now able to meet the demand much better than we did the first year, so that’s a big piece of it.  In addition to that, though, the Figo is a big selling car for us.  It’s the third bestselling car in the country.  On top of that, we launched the new Focus recently and the Transit, which is our re-entry into the commercial van segment.

ALEC HOGG:  It’s good to see Ford doing well again.  Many people in South Africa have a relationship with the brand.  It’s also good to see that your Global Chief Executive – Alan Mulally – was out here last month.  What does that tell us?  Are you going to invest a little more?

JEFF NEMETH:  Well, it was absolutely fantastic to have Alan here.  As you know, he’s such a dynamic leader and really, a big piece of why Ford is as successful as they are, after the crisis in the US auto industry.  Two of our competitors ended up having to take a government bailout and we were able to avoid that under Alan’s leadership, and really behind – again – the great products.  What was really great was that Alan was able to come to South Africa, and it was really to celebrate a couple of milestones: our 90th year as I mentioned earlier, but we also built our three millionth vehicle in our Silverton plant while Alan was here.  He was able to celebrate with our workers.  He came here just before we announced that we were going to build the Ranger for global consumption, and it was really the first time that South Africa was designated as an export location for Ford.  He was here in 2009 to participate in that decision, he saw the plant then, and he hadn’t been back.  He wanted to come back and see what we were able to do with the R3.4 billion that we invested here in South Africa.

ALEC HOGG:  There’s lots of good news, Jeff.  He celebrated – this is the global CEO – with your workers, but that was only a few days after your workers were in fact at home, and not working.

JEFF NEMETH:  Yes, it was great that they were back; otherwise, it would have been a very small celebration – Alan and I cracking a beer or something…  Anyway, it was fantastic that they were back and one of the things he mentioned to me, which was so strong…  As we were walking away from the vehicle, – we drove it in amongst the workers – and we got out of the car, put his arm around me and said ‘the morale is fantastic’.  I said ‘absolutely Alan.  Our workers really want to work.  They were very disappointed to be out as long as they were.  It’s really interesting – the labour process that we have here.  Some of the improvements we could make in the workers participating with the shop stewards, with the union management, with corporate management, and even getting the Minister of Labour involved to make sure that as we go through these labour issues, that everybody is represented and all the views are represented appropriately’.

ALEC HOGG:  It’s an interesting point that you make, because we’ve seen that from the mining industry as well, where they feel they’ve been separated from the workers by intermediaries: in their case, the trade unions.  Is it similar in the motor industry?

JEFF NEMETH:  Well, I think the trade union leadership serves a very important role globally, and it would be very difficult for our plant’s management and our business here to talk to 2500 workers and be able to discuss the future, business, and strategic issues with them.  We need to have an intermediary that represents those workers to have those meaningful discussions.  The union therefore serves a very important role in representing the needs and the views of their constituents.

ALEC HOGG:  You’re talking ‘corporate speak’ now.  The reality of this is that the workers and the management are not engaging with each other.  They don’t know what is on the table.  They don’t know the profits, they don’t the insides of the business, and consequently they will often go out and strike without really understanding it.  That’s the feeling from other industries.  Is it the same in the motor sector?

JEFF NEMETH:  What we’ve done in that regard Alec, is that we actually sent 250 of our hourly workers – our line workers – to one of our best productivity, and best quality plants in our entire Ford operation, which was India where we built the Figo.  We sent them there – 250 of them – for two weeks at a time in groups of about 20, to learn the Ford process, to communicate with our workers and our management in another location where we have really good work groups and interaction with our leadership.

ALEC HOGG:  So hence, what you were saying about it making improvements in the system.

JEFF NEMETH:   Yes, and when they came back they were able to…I can’t tell you what a little bit of empowerment, a little bit of accountability and communication does.  I think that’s really how we’ve been able to raise our game here.

ALEC HOGG:  It’s a great story.  On the other hand, though, we had BMW on the one side threatening that if they had the continued labour unrest, they might not be investing as they did in the past and Mercedes saying ‘that’s life.  Let’s move on’.  Where does Ford stand in this?

JEFF NEMETH:  I think it’s important to look at competitiveness, Ford and any multinational has choices.  We can build our plants and products, as can many industries.  What’s really important is that South Africa – both government and union management – agree that competitiveness is what’s going to continue to make South Africa successful, and continue to grow jobs.  What we’ve been able to do and what we are really advocating is that we focus on productivity and reliability of supply.  Therefore, if you improve, if anyone improves productivity year after year – forever – then they don’t have to worry.

ALEC HOGG:   Have the unions come to the party on this?

JEFF NEMETH:   They certainly have in our plant.  They’ve embraced the productivity challenges that we’ve given them.  We’ve actually led the region, which right now is Asia, Pacific, and Africa so we’re talking about our plants in China, India, and Thailand – some of the big manufacturing areas.  We actually lead all those plants in the amount of productivity that we get year over year from our plant here.

ALEC HOGG:   So it’s not just the improvement, but in the actual delivery.

JEFF NEMETH:   In the actual delivery…

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