On the Road to 2000

C.R. Charlton

Honoured guests, ladies and gentlemen: It feels comfortable and relaxing when we have one of our fellowmembers addressing us - and that is the happy position we are in today. Mr. Kenneth Harrigan is known to many of us, and this need not be a lengthy introduction - more of a brief reminder.

Briefly then, he was born in Chatham; and graduated with honours in Business Administration from the University of Western Ontario in 1951. He promptly joined Ford Motor Company's staff in sales and marketing. It would seem that Ford's management had their collective eye on him from the start, as he was given experience in the sales/marketing offices in Toronto, Winnipeg, Calgary, Edmonton and Vancouver before he was appointed in 1968 General Sales Manager in Ford's head office on Canadian Road. Four years later, he was given international experience by serving as Sales Director of Ford's Asian operations from Australia and later to England to direct sales in southern Europe. With this national and international background, it seemed a very natural development when, in 1981, he became President and Chief Executive Officer of Ford Canada.

On the personal side, Mr. and Mrs. Harrigan have a son and daughter. He has been, and is active in extramural ways, such as serving on advisory councils, the Board of Appleby College, and being part of a federal task force which, in 1983, investigated the automotive industry in North America and urged a greater Canadian content in imported cars. Mr. Harrigan is known to be a prodigious worker, usually putting in a ten-hour or longer day. In the highly competitive, rough and tumble, mercurial auto industry, the soft-spoken, hard-driving, well-trained Ken Harrigan seems to be acquitting himself very well.

It is a pleasure to present Mr. Kenneth Harrigan.

Kenneth Harrigan

Madam President, head table guests, ladies and gentlemen: The North American automotive industry - yes, the Canadian automotive industry - has come through the most severe and most challenging period in its history. I am sure each of you in this room is well aware that our business is probably the most cyclical of all businesses on the continent and, I believe, you appreciate the tremendous economic impact our industry has in good times, or bad, on the economies of Ontario, Canada, and all of the United States. We are a high-profile industry which receives an inordinate amount of attention from governments, from economists, from the media, and from consumers, an indication of the importance of the industry. We should not lose sight of the fact, however, that the automotive industry has fuelled the engine of Canada's and of North America's economic recovery. The majority of the GNP growth in Ontario last year was directly attributable to the North American auto industry. Without our industry, and the allied industries associated with the auto industry, this nation could well still be in a recession!

Before discussing the future prospects for our industry, perhaps a brief review of the last five years would be appropriate. In a recent speech I quoted the famous English novelist, Aldous Huxley, who wrote: "Life has to be lived forwards; but it can only be understood backwards. I suppose that's why we always make the important discoveries too late." Rather prophetic words from Mr. Huxley.

The North American automotive industry has emerged from one of the most difficult periods in its history. At Ford we did, indeed, look backwards before looking forward - however, we did not make the important discoveries too late. Our company has initiated a complete review and a complete restructuring of the way we do business; a restructuring, I might add, which is only partially complete. Many of the problems we encountered were created by our own hand. However, we also faced external hurdles that, for the most part, were beyond our control.

Our responses to these seemingly unending problems were not haphazard. At no time did we simply react. We acted, of course, in response to our problems and we made changes as dictated by events, but we kept a firm hand on what we were doing and where we were going. We identified five basic requirements to put our house in order so that we could compete in the global environment.

Our first and overriding commitment was to get our quality right. The quality-Iam talking about was not limited to our products or to our design centres, or to our manufacturing and assembly facilities; it was quality in our total product development cycle; it was quality in our people; it was quality in our dealerships.

Our second commitment was to product. We took a new approach in function and appearance. We had to have the courage to be different, but not in frivolous or superficial ways, in order to achieve a driver's car with product integrity.

Third, we strengthened our commitment to longrange planning - developing a road map, if you will, for the next twenty years. We reached a common understanding of what we were trying to do; we set our objectives and we developed plans to achieve them that were realistic, anticipatory, and flexible.

The fourth item on our agenda was the "meat and potatoes" business of getting our costs in line; finding ways of being more efficient, and cutting back on the operating costs of our business. This task took a major effort of will and relentless attention to generate the economies of scale that were necessary for our economic survival.

And, finally, if we were to achieve all that was necessary, we had to tap our most valuable resource in more appropriate ways - the human resource. We launched employee involvement so that all of our people at all levels in factories and offices, could bring their own inventiveness, their own experience and knowledge, and their own enthusiasm to the tasks at hand. At Ford people were, and, more importantly, ARE the key to all of the things that we had to accomplish.

... By the year 2000, we expect the Canadian vehicle market will reach two million retail sales

You may have read in the last several days the financial reports issued by Ford of Canada and by Ford on a worldwide basis, figures which represent an excellent turnaround in our balance sheets. I should caution, however, that these favourable results represent the first stage in the attainment of an adequate return on the significant investments our company has made, not only here in Canada, but on a worldwide basis. If our company is to compete in the global environment, these profits are necessary to fund even more ambitious investment programs in the years ahead.

"The Road to 2000", as my speech is entitled, is my attempt to describe for you how my company, and our industry, is changing as we rapidly approach the end of this century. It is difficult to imagine that the year 2000 is as far in the future as the year 1970 is in the past. The new foundations we have built in the last five years will provide a solid base for the directions we will follow in the years ahead. By the year 2000, we expect the Canadian vehicle market will reach two million retail sales. This compares to 1.3 million in 1984; I would hope that the majority of the vehicles will be produced in North America. Will we then, as a North American producer, be able to achieve an increased share of this expanded market? We believe we have the basics in place to build on and to develop the types of vehicles that consumers will demand. We will use every new idea and technological tool at our command. The entire thrust of our approach will be aimed at continuous improvement and, most importantly, we will ensure that customers are the focus of everything we do.

We have, as a company, already set and started to meet the goals which will take us to the year 2000. At the recently concluded Toronto International Auto Show, Ford unveiled two new vehicles called the Ford Taurus and the Mercury Sable. These two new products, which will be available to the North American public this fall, incorporate some very significant elements of movement from the products of the 80s to the products of the 90s - on the Road to 2000. In these new cars are the concepts of the paperless factory - a very heavy infusion of robotics, other forms of automation, vision robotics, modular assembly techniques, heavy use of computer-aided design, computer-aided manufacturing, and computer-aided engineering. What these new vehicles also represent, however, is a total teamwork approach to the design, engineering and manufacturing of a product. Early and consistent teamwork were essential to these new products - teamwork between market researchers and product planners, between design and manufacturing engineers, between our outside suppliers and the company, between salaried and hourly workers, and between all of our staffs and our plant people. For example, instead of a designer drawing a part and turning the plan over to a manufacturing engineer to find a way to produce that part, they worked together to design the component that could be produced efficiently and with high quality. Another example: we involved outside suppliers earlier than ever before in our product development process, some as many as three years in advance and, as a result, we will achieve better quality and greater manufacturing efficiencies.

The result of our team approach to the new Taurus and Sable is designed-in and built-in quality - which will translate into consumer satisfaction! Our objective has been to prevent problems at every stage rather than trying to correct them after they have occurred. We prevented them by analysing past problems, by building more prototypes earlier in the program, by using statistics to measure and to predict quality, by aggressive insistence on reliable machine tools from our suppliers, and by getting the existing expertise of all of our people before the fact, rather than after. This team approach, together with new manufacturing techniques, will enable us to fulfill our promise to our customers - the promise that the cars will be as good and as trouble-free as they look. In short, that is product integrity and that is the essence of the soon-to-be-offered vehicles, and is the essence of each and every vehicle that the Ford Motor Company will offer to consumers on a worldwide basis in the years ahead. Not withstanding my obvious enthusiasm for the products and processes I have just described, we have more questions than we have answers concerning the future.

At Ford, however, we have several firmly-held beliefs that I would like to share with you today. To begin with, it is imperative that we develop a clear vision of our future products - what they are to be in the broadest sense and how they are to serve our customers' needs. Then we must have a clear idea as to how these products should be designed, engineered and executed with better quality and lower costs. We must develop leadingedge technologies in both product and manufacturing, and in support systems as well. We will need to define the relationship between the technology and support systems, and the people responsible for the product. And, finally, the product will have to meet precise market and cost objectives and productivity improvements of at least fifty per cent.

Recently there has been some news media attention paid to a plan we call Alpha. For our part, we have not released too many details regarding this program; however, I can tell you that a lot of good work, that has already been going on, will flow quickly into our Alpha project. Alpha will help to define Ford's factories of the future; the paperless design development and manufacturing process; the ideal application of many new technologies; the optimum inter-reaction between people and technology. It will go well beyond what anyone else is doing anywhere in the world - yes, into uncharted waters. We regard Alpha as our highest priority advanced project.

Making certain our company succeeds in the long term will be a tremendous task. However, we are extremely optimistic about the interim. I believe I can translate my optimism with three observations. First of all, our technical people believe there are extraordinary gains to be made within the limitations of our present facilities, and this work will continue. Second, in many instances we will not have to wait for the ultimate Alpha product to benefit from the work. As the feasibility of each good, new concept is proven, we intend to aggressively adopt that concept. And, third, my colleagues and I continue to hear from many individuals that our company is right on target concerning the importance of the people side of the equation; there is unmined gold out there to be discovered, simply by striving for excellence and by seeking continuous improvement in the way we all work together.

I might add that working together, today and in the future, will go beyond our company in assuring success. Management, labour, and government all have a responsibility and must work together to improve Canada's cost and productivity base in order to improve our competitive position in the worldwide marketplace. I was particularly pleased to hear recently the Honourable Frank Miller, our new Premier, come out in support of the recommendations of the automotive industry task force which made its report to the federal government in May of 1983. The recommendations of the task force have, for the most part, been acted upon. However, the most important recommendation, that of a new trade policy, which would encourage and, in fact, require investment in our country by overseas manufacturers and would result in increased employment, has yet to be acted upon. I am sure my colleagues in the automotive industry would echo my sentiments, and those of the Premier of the province of Ontario, in asking the federal government to act on this important recommendation. The basic inequities that exist in our own home mar--~ kets have, to a degree, been minimized by the imposition of voluntary restraints on Japanese-produced vehicles. These restraints have given the North American manufacturers the opportunity to restructure their enterprises to be more competitive in an effort to overcome the enormous differences in labour costs, work habits and productivity we have with Japan's automotive industry. This restructuring is only partially complete and, despite the economic impact studies that have been carried out by certain government departments and by outside think tanks whose reports have been rather one-sided, I believe that the government should renegotiate the import restraints for at least one more year, if not longer.

... I believe that the government should renegotiate the import restraints for at least one more year, if not longer ...

One thing that should not be overlooked, by all those.., criticizing restraints, is that Canada and Canadians are producers as well as consumers - and Canadians will need to continue to be producers if our standard of living and buying power are to be maintained. As I said earlier, the profitability of the North American automotive companies, when weighed against the significant losses that have been made, and the significant investments that have been undertaken, cannot be termed as a recovery of our industry. If we are to continue our headlong plunge into being fully competitive on a worldwide basis, we will continue to require the breathing space that the voluntary restraints can offer. I might also add that if it was not for restraints, there would have been very little additional investment in Canada by overseas or domestic automotive manufacturers and suppliers in the past two or three years.

... we will require the co-operation and understanding, and a strong relationship between government, labourand the business community...

Ladies and gentlemen, if our industry is to prosper and is to provide employment and investment in the years ahead, we will require the co-operation and understanding, and a strong relationship between government, labour and the business community. With the rapid developments that I have described for you, and with the increases in productivity and new technologies, I would caution that in the longer term future we may see a reduction, through attrition, of a number of employment opportunities in our plants. Some will be the result of automation, while others will be as a result of outsourcing whole or partial operations. We will be seeking to manufacture our products with greater efficiencies and at lower costs and the industry will call upon independent companies to produce, with our technical assistance or through joint ventures, many of our future projects. As an offset, I believe these new technologies can create new employment in Canadian industries that will not only serve us, but also supply a worldwide automotive industry. We already have a couple of examples today, but we need many more well before the year 2000. We are on our way to preparing ourselves for the meaningful challenges that the next fifteen years and beyond will present.

The Road to 2000 will not be strictly freeway driving. We will encounter hazards, obstacles and unanticipated detours, like many motorists encounter today. The next fifteen years will produce more changes in our industry than the total of the past eighty years of automotive development in Canada - changes that will be dictated by both consumer demands and by the automotive industry's worldwide capacity. These changes will affect:

The types of products produced. The new products will be tailored to consumer wants and needs; will be almost maintenance free; will be even more fuelefficient than vehicles on the road today, although they will still be fuelled by gasoline; and will be safe, comfortable and fun to drive;

The way they are produced. New technologies in design, manufacturing and engineering will be employed and more precise methods of assembly will be commonplace;

The methods used in selling and marketing. Vehicle buyers will be more cognizant and more knowledgeable about the products and what their individual requirements will be. We will be more accurate in the methods employed to reach this new breed of consumer;

Our relationship with our employees and with unions will continue to improve and to mature. Work habits, standards and practices will change to meet the global challenge;

And, finally, total consumer satisfaction will be our ultimate goal with quality products and quality dealers to look after their needs. These important changes are not a pipe dream, they are a prediction of the future. This will be the case in the year 2000 and at my company we are already on the road to ensuring that we are part of these changes and that we will share in the benefits of those changes when they occur.

The appreciation of the audience was expressed by Dennis Madden, a Director of the Club.