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New plant will produce transmissions for hybrid C-Max, Fusion, and more, as well as six speed auto

DailyTech had the privilege of touring Ford Motor Comp.'s (F) new hybrid transmission flex-line assembly plant in Sterling Heights, MI last Thursday.  Located on Van Dyke Rd., roughly 20 min. northeast of the city of Detroit, the Van Dyke Transmission plant has been opened since 1968.  

Long in the tooth, some feared the long-standing facility could become the latest casualty of a fading American manufacturing empire.  But Ford was determined not to let that happen.

The company has injected $220M USD in capital to revamp the plant, turning it into a flexible line capable of fulfilling the demand for hybrid transmissions domestically.  The plant will build the mixed transmissions of the Ford C-MAX HybridC-MAX Energi plug-in hybridFusion Hybrid, Fusion Energi plug-in hybrid and Lincoln MKZ Hybrid.

Jim Tetreault
Jim Tetreaulter, Ford's North American manufacturing chief

Ford's vice president of North American manufacturing, James "Jim" Tetreault lead off the unveil, praising the United Auto Workers union for making the painful compromises and deep commitments necessary to produce the transmission at a lower cost than it could have been overseas, keeping jobs in America.

He commented, "I'd like to recognize the UAW for your efforts and thank you very much for your support."

The plant will be taking over manufacturing duties from Aisin-Warner -- the joint venture between Japan's Aisin Seiki Comp., Ltd. (TYO:7259) and Michigan-based BorgWarner, Inc. (BWA).  The Fusion hybrid's transmission was previously produced at a Japanese plant in the greater Tokyo area.

Jim Tetreault
Mr. Tetreautler motions over a finished hybrid motor.

Despite a transition from non-unionized Japanese laborers to UAW workers, Ford says it will actually save on manufacturing costs for hybrid transmission.

Ford says many of its peers fail to look at the full cost of outsourcing.  Between shipping costs, "currency fluctuation", and communications overhead, whatever cost advantage overseas non-unionized manufacturing holds quickly evaporates.

Some may wonder why Ford is forced to choose between relatively expensive U.S. and Japanese labor.  One factor is that cheaper labor regions like China present a hostile intellectual property environment and human rights issues.  Again, the true cost at the end of the day is often far higher than the quick and dirty figures that have led some to jump at outsourcing bids.

Mr. Tetreault estimates that an assembly that cost $77 USD to produce and ship from Japan will be produced at the plant for only $58 USD, a nearly 25 percent cost reduction, and a blow to those who have villainized American trade unions in recent years.

Finished small engine
Space-age plastics cuts the weight of the hybrid transmission while
maintaining rigidity and mechanical integrity.

Richard Notte, mayor of Sterling Heights praised Ford's revitalization of the Transmission Plant.  A UAW veteran, Mayor Notte started work in 1959 at the local Ford Axle Plant, working as a skilled welder.  He retired in 2004 and became active politically.  Now he was ecstatic to see his hometown recommit to American manufacturing.

He said that Sterling Heights would like to welcome "one of the biggest plants in American for Building hybrid transmissions."

Mayor Richard Notte
Sterling Heights Mayor Richard Notte

The new plant will add 225 new manufacturing jobs, a notch towards Ford's goal of 12,000 new hourly jobs by 2015.  Ford plans to spend an addition $412M USD to grow the remaining domestic manufacturing jobs over the next three years.

Mayor Notte comments, "The auto industry is never going to be as big as it once was, but It's still going to maintain its mark on the world."

Finished Assembly
A finished transmission assembly, with the engine.

130 new workers are already on the job at the plant's assembly line.  The line now employs 1,350 workers.  The remaining 95 new workers will start before the end of the month.  

Ford says it received 10 times the number of applications as it had jobs to fill -- a sign of just how untapped America's supply of skilled laborers is.

We did inquire to Mr. Tetreault whether it was difficult for Ford to keep cost-competitive with its domestic rivals -- the Chrysler Group and General Motors Comp. (GM) -- since they continue to enjoy the fortune of being practically exempt from state and federal taxes.

He commented, "I'm not going to go there.  It's all water under the bridge, as they say."

But Ford clearly is determined it can overcome both a heavily pro-outsourcing recessionary climate and its domestic peers' special-interest advantages, delivering the "best product they can at the best price" as a local union rep put it.
Engine gear close-up
Gears gleam under the bright lights on the plant floor.

Ford says that in additional to the jobs at the plant there's typically a 10-to-1 multiplier in terms of for every job created at a major manufacturer's line, there's ten jobs created at suppliers' facilities.

Valve closeup
Valves tower over a finished engine/transmission assembly.

Out on the floor Ford showed us the line that activated six weeks ago (in June).  The line has been producing prototypes on the line since 2011.

The "secret sauce" that helps keep costs so low at the transmission plant is its flexible design.  Capable of producing either the 6F -- a conventional six-speed automatic -- or the HF35 -- a hybrid transmission, the plant can compensate for lulls in hybrid demand by producing conventional transmissions.

Engineer w blocks
Ford engineer Donald Iaquinta shows off transmission blocks.

Given the variability observed in demand for electrified vehicles, this seems a wise strategy.

Ford engineers in a post-tour discussion said that there are many difficulties facing the electrified market.  One issue is payoff.  Ford says its market research shows that customers want their electric vehicles to pay off the cost difference (via savings in gasoline expenses) within four years.

Given the cost of batteries and the soaring fuel efficiency of both traditional gasoline and diesel vehicles, that's a tough target to hit.

Another complicating factor are driving habits.  Optimizing hybrid savings requires the driver to know when and how to brake, in order to recover the most kinetic energy.  Brake too hard and the kinetic energy goes to waste.

Ford engineers estimate that drivers will see a 15 to 20 percent increase in fuel economy once they learn to optimize their driving habits to the hybrid.

Hybrid stators
Stators -- the stationary component of the EV motor/generator.

As complex as they are, the hybrid transmissions don't take that long to produce.  Mr. Iaquinta estimates that the average time at a workstation is approximately 25 seconds, with the entire transmission taking around 2 hours to produce.

Hybrid rotors
Rotors with pumps to maintain line pressure.

The components are sourced to a variety of domestic and foreign manufacturers.  For example, Toshiba Corp. (TYO:6502) supplies the control stators seen above.  Other parts come from literally down the road in the local Detroit area.

The hybrid and conventional transmissions have some parts in common.  For example, the pump to maintain line pressure for start/stop in the conventional engine is recycled as a lubrication and cooling pump in the plug-in variant.

RTV robot
The RTV robot applies liquid gaskets.

Much of the assembly process still requires a high degree of human interaction.  However, the humans get a boost by some robotic line workers.  One of the most impressive of the robots was the RTV.  Featuring a hulking robotic arm, this robot was capable of lifting the entire transmission assembly and applies liquid gaskets using a smaller arm, curing the polymer into a finished gasket.  The process replaces older paper-gasket assembly methods.

Kitted Parts
Kits are key to fast switches between the two transmission types.

Other than the blocks, virtually all the parts are kitted and tagged with QR tags for quality control purposes.  This saves on assembly time on the line.

It also helps the line be able to switch faster between transmission types.  To switch from the hybrid transmission to the conventional one, or vice versa, the line simply has to pick the proper kits and change the tooling on the human-operated power tooling and robots.  The net result is that a switch can be accomplished in minutes, allowing uninterrupted production all day long.

Line Worker
A line worker applies parts to an in-progress transmission.

The proof is in the product, as they say.  Ford's finished transmission is 20 percent lighter than its foreign predecessor.  And thanks in part to its confidence in the in-house assembly; along with engineering improvements, Ford has been able to bump the hybrid operation speed from 47 miles per hour in the previous Fusion to an impressive 62 miles per hour.

Given the flexible nature of its plant, it's hard to see how Ford's new line could be anything other than a terrific story of domestic manufacturing success, regardless of how many buyers choose to go electric.

(All images © Jason Mick/DailyTech LLC, may be used with attribution, click any image to enlarge.)

Sources: Ford [1], [2]

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They are completely right.
By Amiga500 on 8/6/2012 12:34:07 PM , Rating: 5
Outsourcing complex component/sub-assembly production/assembly to cheap labour zones is a false economy.

The bean counters are quick enough to point out how much money it saves at the outset. Yet, they crawl under a rock when all the costs of training and rectifying errors become clear over time.

RE: They are completely right.
By Lord 666 on 8/6/2012 1:32:30 PM , Rating: 2
Actually, your statements apply to all levels of outsourcing... not just offshoring.

RE: They are completely right.
By Amiga500 on 8/7/2012 2:57:07 PM , Rating: 2
I would say it doesn't apply to highly specialised design work.

For instance, I'm an aero engineer. We do specialist work for various OEMs - because they all have different programs running to different timescales - no single OEM could employ people like myself consistently in the numbers they need for a few years of any given program. It peaks and troughs too much - they would be out a fortune on redundancies, or could never bring a program to market quick enough.

Further to that - because we work for a load of OEMs, knowledge and wisdom gained on each program is applied to subsequent programs. The OEMs know this and know it is a vital sanity check and alternative viewpoint for their in-house experts (who are usually right anyway). The knowledge transfer is not a one way street.

Yes, I think the OEMs may have went too far in some of their outsourcing - but I don't believe in itself it is bad when there is knowledge flowing back to the one who out-sourced.

RE: They are completely right.
By nolisi on 8/6/2012 1:38:52 PM , Rating: 5
The bean counters are quick enough to point out how much money it saves at the outset. Yet, they crawl under a rock when all the costs of training and rectifying errors become clear over time.

American business tends to treat offshore/outsourced entities differently than they treat employees. When one of us makes a mistake, our job is on the line. But the same types of mistakes are permitted en masse with outsourced resources due to perceived cost savings over time arguments.

My favorite recent personal example- an entire IT staff was laid off due perceived issues (the issue being management didn't want to invest in keeping the department up to date with either resources or skill set). They instead move to a cloud provider who provides infrastructure + 24/7 support by way of international call centers.

Their migration of resources to the cloud has taken 2 months longer than originally slated, with continuing outages to business critical resources. The company has thrown away about 30% of its payroll over 4 months due to lost productivity- meanwhile any faith the employees might have in support that this company might provide has been destroyed.

But the executives will likely still get bonuses at the end of the year...

RE: They are completely right.
By Chadder007 on 8/6/2012 4:22:33 PM , Rating: 2
Yep, and its about the kick backs from the outsourcing companys too.

RE: They are completely right.
By Reclaimer77 on 8/6/12, Rating: -1
RE: They are completely right.
By tayb on 8/6/2012 3:49:13 PM , Rating: 3
The problem has never been "we don't have enough money to hire more people." But even if that were the problem the answer is not "let's reduce income taxes and capital gains taxes" That is an idea that makes absolutely no sense and didn't even work anyway. And even if you think employment taxes are the reason why companies outsource those taxes have been around for decades and are relatively unchanged. The only thing that has happened in the past 20 years is insane increases in the costs of health care which has been picked up by employers... and Obamacare actually helps, not hurts, that issue.

As for Obamacare... If you own a business and employ fewer than 50 workers you are exempt from Obamacare. You are not required to provide insurance. If you employ more than 50 workers you can either pay a $750 fee per employee or offer health care. The $750 fee is not nearly large enough to justify not hiring someone and the vast majority of companies this size already offer health care anyway. If you have fewer than 25 employees you are also exempt but if you choose to offer health care you can get up to 50% of those costs reimbursed. Also, the insurance exchanges will allow small businesses to shop for insurance like big businesses and enjoy reduced rates which means reduced costs. Overall it is unlikely that Obamacare will have a net effect on hiring positive or negative but it is likely to reduce insurance costs and taxes for the thousands and thousands of small businesses out there, which is a GOOD thing.

I don't even think outsourcing is an actual problem. We outsource unskilled labor to countries where labor is extremely cheap and retain high skilled labor. And that is what America should want. Lots of high paying high skill jobs and let other countries have all these low paying low skill jobs. Businesses haven't shown a desire to outsource high skill jobs and the costs associated with hiring these people obviously isn't a deterrent. Just look at the unemployment rate for STEM grads. We need more STEM grads not more history majors.

Honestly, these jobs that have been outsourced in the past decade were going to be lost anyway. Robots have taken just as many of our factory jobs as China has and eventually there won't be any UAW in Detroit because factories will be completely autonomous. Who would we blame then? Skynet? Have you ever watched "How It's Made?" Most of the time the only people in the factory are the guys loading boxes...

I'm all for reducing red tape but I don't know how you overhaul unemployment, social security, and medicare without causing riots.

RE: They are completely right.
By Reclaimer77 on 8/6/12, Rating: 0
RE: They are completely right.
By Spuke on 8/8/2012 10:30:13 AM , Rating: 2
And a REDUCTION in insurance costs??? You're just lying now, that's so far from reality it's shocking.
Obamacare won't reduce healthcare costs. No one is saying that except the "news" outlet idiots. The point is to arrest the increase in costs or stop the rise altogether (not happening). I don't know where he got that from either.

RE: They are completely right.
By StanO360 on 8/16/2012 5:32:05 PM , Rating: 2
Abbott Labs is moving a lot of stent manufacturing to Ireland and Costa Rica, why? Labor costs? No. Two reasons, 35% corporate taxes and costly regulations (not for the devices that won't change, but EPA type regs.). There are many others as well

RE: They are completely right.
By nolisi on 8/6/2012 7:50:59 PM , Rating: 3
You can blame businesses all you want for doing what makes sense, or you can help turn this thing around and make America, once again, the place where things get done and stuff gets built.

The problem is it doesn't make sense.

Firms like Cisco and Apple are concerned about infringement, so it manufactures its devices in China, a country noted for weak property rights and creating knockoff clones. Then they spend millions in patent suits and hunting down black market providers.

Firms like HP and Dell want to be known as providing enterprise class support for their products, yet they tie the hands of their call center agents located in India to scripts which extend time to resolution. And the level of service drops so low that businesses resort to local VARs.

This trend to increased outsourcing started well before Obama, and as long as American businesses can drive down costs in places that don't care about patents, black markets, and SLAs, the actual hardworking Americans will pay top dollar for substandard service and products.

I love the idea that Americans are supposed to be patriotic. I truly do. I'm wondering when corporations (who are supposed to be people) will start behaving like they love this country too.

You're kidding yourself if you think outsourcing had anything to do with the last three years. I'm sure you don't want to talk about the 8 years preceding.

RE: They are completely right.
By Reclaimer77 on 8/6/2012 8:07:25 PM , Rating: 1
Oh the trend clearly started a long time ago, but despite the rhetoric about "investing in America" bla bla bla, his highness and his cronies have the opposite in mind.

It's not just America that has this trend. To oversimplify things, the bigger the Government the more it squeezes on private industry.

I came across this when reading about the Raspberry Pi and thought it was interesting:

"I’d like to draw attention to one cost in particular that really created problems for us in Britain. Simply put, if we build the Raspberry Pi in Britain, we have to pay a lot more tax. If a British company imports components, it has to pay tax on those (and most components are not made in the UK). If, however, a completed device is made abroad and imported into the UK – with all of those components soldered onto it – it does not attract any import duty at all. This means that it’s really, really tax inefficient for an electronics company to do its manufacturing in Britain, and it’s one of the reasons that so much of our manufacturing goes overseas. Right now, the way things stand means that a company doing its manufacturing abroad, depriving the UK economy, gets a tax break. It’s an absolutely mad way for the Inland Revenue to be running things, and it’s an issue we’ve taken up with the Department for Business, Innovation and Skills.

So we have had to make the pragmatic decision and look to Taiwan and China for our manufacturing"

I love the idea that Americans are supposed to be patriotic. I truly do. I'm wondering when corporations (who are supposed to be people) will start behaving like they love this country too.

How does patriotism have anything to do with this? Don't try to make this some emotional issue, that's cheap.

If you want less outsourcing, it's really simple, cut taxes, cut the red tape, cut the bullcrap environmental penalties and pay-for-play scams, and just let businesses do business.

RE: They are completely right.
By JasonMick on 8/6/2012 9:20:49 PM , Rating: 2
How does patriotism have anything to do with this? Don't try to make this some emotional issue, that's cheap.

If you want less outsourcing, it's really simple, cut taxes, cut the red tape, cut the bullcrap environmental penalties and pay-for-play scams, and just let businesses do business.
I agree to some extent in that there should be a flat tax for businesses and on personal income.

But modifying payroll taxes cannot help if the untaxed cost of labor is "too expensive" in a company's eyes compared to foreign alternatives.

For example if Apple can make an iPad in China for $0.50 (cost of labor), and it would cost $6 to make here + $1.50 payroll taxes, even if the payroll taxes were completely eliminated , at $6 it would still be "too expensive" to manufacture domestically .

Two key factors in this problem are:
1. Certain nations like China manipulate their currency to make their cost of labor "cheaper". The U.S. gov't does nothing to combat this, virtually. In fact, in many cases it rewards the manipulators via a variety of mechanisms
2. Companies fail to see peripheral costs of outsourcing -- e.g. stolen intellectual property (cough, China), etc.

RE: They are completely right.
By superstition on 8/6/12, Rating: 0
RE: They are completely right.
By StanO360 on 8/16/2012 5:34:49 PM , Rating: 2
Ok if conservatives are "plutocrats" then liberals are Fascists.

RE: They are completely right.
By superstition on 8/20/2012 7:31:53 PM , Rating: 2
Way to avoid the important point of the post:

The only tax that is flat isn't flat. In order for the tax to not be regressive is to have one that takes into account the fact that money makes money.

The more money one has, the more "tools" that person has at their disposal to get more. That's why we have companies and individuals of high income who pay very little in taxes, or even get money back (like GE).

A flat tax is favored by so-called conservatives (plutocrats in disguise) because it pretends to be something it isn't: fair.

The "liberal/conservative" dichotomy, as always, is a distraction.

RE: They are completely right.
By nolisi on 8/6/2012 11:34:42 PM , Rating: 2
How does patriotism have anything to do with this? Don't try to make this some emotional issue, that's cheap.

Fine, then please respond to the very legitimate points regarding stolen IP and drop in service issues that I brought up. It's the price Americans are forced to pay if the entire supply side of the *Amercan* market offshores.

Ignoring them is a cheap. ;)

Besides that, I'll stop using patriotism when American business stops using patriotism to invoke people. I figure if they can use it to invoke people to purchase products built by underpaid (by American standards, cuz they are American companies) labor, then I think I should be allowed to use it in an argument.

Here's a creative solution, executives should be paid in the same proportion to what offshore labor is compared to American labor.

Yeah, capitalism doesn't like consistency.

By Reclaimer77 on 8/7/2012 10:27:24 AM , Rating: 2
Fine, then please respond to the very legitimate points regarding stolen IP and drop in service issues that I brought up. It's the price Americans are forced to pay if the entire supply side of the *Amercan* market offshores.

Because it's a non-issue. It's one of those argumentative talking points that sounds good, then falls apart when you apply logic to it. Stealing IP and ideas, hell even stealing military secrets from us, didn't start with Corporate outsourcing. Using someone elses example of the iPad, how did outsourcing increase someone's ability to reverse-engineer one? Anyone could buy one, break it down, and learn it's secrets.

As for your other parts, all straw men designed to make capitalism and the free market the bad guy, instead of having the courage to tackle the root causes.

Here's a creative solution, executives should be paid in the same proportion to what offshore labor is compared to American labor.

Idiot. Executives should be paid what their employers decide to pay them. I'm sure you wouldn't like someone telling you what you "should" be getting paid, and placing artificial limits on your earning potential. By like a typical class-warfaring leftists, you see no problem doing this to the "rich". Not to mention this entire premise is beyond idiotic. Paying people in America proportional to what the workers in other countries get paid? What? Why? Did this really sound like a good idea to you?

RE: They are completely right.
By StanO360 on 8/16/2012 5:36:15 PM , Rating: 2
Companies should pay their executives exactly what the Board and stockholders believe he/she is worth.

RE: They are completely right.
By Amiga500 on 8/7/2012 2:59:34 PM , Rating: 1
Oh f**k up you gormless idiot.

Same shit - different day.

Your f**king clueless - throwing out the same old mantra day after day after f**king day.

Change the record would you - the current one is broken.

RE: They are completely right.
By Reclaimer77 on 8/7/2012 3:14:35 PM , Rating: 1
Hey Amiga I think your diaper needs changing. Sheesh! Throw a tantrum why don't you.

RE: They are completely right.
By Amiga500 on 8/7/2012 5:40:10 PM , Rating: 2
Unsurprisingly the rednecks voted me down.

I'm sick of you posting the same shite day in day out.

Not only is it normally wholly incorrect, its also becomming annoying.

By Reclaimer77 on 8/7/2012 5:47:23 PM , Rating: 1
Then don't read it.

You might want to get some perspective too. Calling something a "false economy" when it's plainly not, makes you a dumbass.

When it comes to you quoting from Janes about aeronautic things like you have a clue, hey, you're great. On economic issues? Not so much.

RE: They are completely right.
By Jeffk464 on 8/7/2012 1:33:57 AM , Rating: 1
Ford has been one of the fortune 500 that has been outsourcing like crazy. I'm glad to see them reversing the trend but wonder what is the main motivator is. I'm pretty sure they don't really care about the American labor market.

RE: They are completely right.
By Targon on 8/7/2012 5:18:15 PM , Rating: 2
Ford understands that the best way to sell cars is by there being a strong economy in the USA. The best way to improve the economy is to boost jobs in the USA. If reducing costs while improving the economy can be done at the same time, then that is a BIG win overall.

Remember also that those who work for a company do tend to buy products that the company produces, which also is a plus. There are greater losses if products get recalled as well, so better quality is also a plus.

RE: They are completely right.
By StanO360 on 8/16/2012 5:39:58 PM , Rating: 2
I'm sure that's not true, they do care. But their first order of business, their legal obligation is to their shareholders. Most companies do not want to outsource, for all the reasons mentioned, loss of control, theft, inefficiencies etc.

But, the government needs to stop treating business like they're the enemy. It's shocking how many people have no clue about business or economics.

"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov

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