Increasing productivity top priority for automotive sector

Friday, March 31, 2006

The automotive sector is making increased productivity, production cost reduction and investment in creativity its priorities. Their survival strategy has paid off with new opportunities, new markets and increased export figures. Oyak Renaut, Anadolu Isuzu, Ford Otosan and Toyota tell their success stories

HAMİDE HANGÜL

ISTANBUL-TURKISH DAILY NEWS/REFERANS


The Turkish automotive sector, in its attempt to counter the negative effects of the overvalued lira, bases its survival strategy on increasing productivity. The sector has lost 23 percent of its competitive power due to the drop in the value of the euro against the YTL. Aiming at reducing production costs, the sector has adopted a strategy of increasing personnel productivity that would result in minimizing energy consumption and economizing the use of raw materials. Some companies in the sector have already succeeded in their goals.

Oyak Renault recorded revenue of 1.2 million euros last year after taking measures to use its resources more productively. Similarly, Ford Otosan launched its efforts in 2001 aiming to reduce production errors to 3.4 in 1 million, saving $26 million last year.

While increasing productivity by specialized personnel, the sector is also opting for innovation to sustain profitability in the highly competitive environment. By producing new products developed by creative ideas, they aim to achieve product versatility enabling higher competitiveness both in the domestic market and the international market. Empowering the engineering staff is likely to be the next step in the automotive sector.

Another problem challenging the sector is the ongoing decrease in incentives for investment. There was a risk of not being able to sustain the success of the past five years when the automotive sector increased its exports from $2.3 billion to $12 billion because of the decline in investor incentives. The sector believes that tax advantages offered the investor are being misread as “loss of revenue.” In order to compete with countries like the Czech Republic, Slovakia, Poland, Slovenia and Romania, where the investor receives exceptional support, the Turkish automotive sector underlines the necessity of the government's support.

Tax reductions based on levels and categories of investment would increase competitive capacity. The inability to attract new factories and new products is limiting exports to existing models. As the existing models become outdated, concern grows that export revenues will decrease. The sector gained $2.3 billion in exports in 2000, moving up from seventh place to second in overall Turkish economic ratings in 2000. The sector's export figures for 2005 were $12 billion.



Oyak Renault:

Exporting two-thirds of its production to five continents and 100 countries, Oyak Renault has a figure of a $6.5 billion export turnover for eight years, $1.5 billion of it for 2005. The company makes more than 50 percent of its purchases of raw materials, parts and supplies from Bursa and surrounding areas. Their 105 affiliated manufacturers recorded a turnover of $500 million last year. Oyak Renault General Manager Alain Gabillet said problems emerged in the sector with the overvaluation of the YTL. In order to counter the effects of an overvalued lira, they have taken serious measures to increase productivity. Still continuing to apply the measures, he said they were standardizing the work shifts and processes with the Renault Production System. “Mistakes are never tolerated. Manufacturers are asked to supply high-quality products with low costs in a short time,” Gabillet said. “We have prioritized staff training to reach optimal performance in human resources. By training our staff, we are aiming to reach an optimal level in the usage of energy and raw materials. Meanwhile, our personnel can suggest productivity and development proposals in any area. Last year, we received 14,000 proposals from our workers, 9,500 of which were applied to add 1.2 million euros to our profits. We will continue doing this.”



Anadolu Isuzu:

Turkish engineers now design the Turquaz and Royal bus models that are produced in Anadolu Isuzu's Gebze plant. The newly designed models are being exported to 18 countries. Ten percent of the 750-strong workforce of Anadolu Isuzu is employed in product design and development. Metin Ecevit, the head of the Automotive Group of the Anadolu Group of Companies, believes that survival in the automotive sector is directly linked to creativity. Ecevit says being ahead of the market should be favored instead of following the market. “If you run instead of walking, then you might be able to stand up on your own two feet. Otherwise, companies will stop profiting in this kind of a highly competitive market.”

The automotive sector has to follow new technologies closely in order to continue being a profitable sector, Ecevit told Referans. “The only way to profit is in innovation. As Anadolu Isuzu, we are working on diversifying our products as well as creating new markets. In this context, our new engines and new models are gradually appearing in the market. We are also developing our marketing capacity abroad. We have created a dynamic pool for the employment of engineers. By hiring 25 new engineers, we will have 50 in our engineering force.”



Ford Otosan:

With two plants in Kocaeli and Eskişehir, Ford Otosan is continuously working on export-oriented capacity-building and investing in new products. It has invested $375 million in extra capacity-building. The annual production capacity of the Kocaeli plant will increase to 280,000 units in 2007 from the current 240,000. They will also update and diversify their models of the new Transit, Transit Connect and Ford Cargo 6x4 dump trucks. Ford Otosan General Manager Turgay Durak said a new design of diesel engine for the Transit and designing and the production of new engine models for the Cargo would follow. “With the help of our new investments, our export revenues will increase from $2 billion to $2.3 billion in 2008. We are also aiming to reduce production errors to 3.4 in 1 million at our Kocaeli and İnönü plants.”

Durak said their efforts to increase productivity have proved successful: “We launched six Sigma systems in 2001 and completed a total of 182 projects in 2005. As a result we have been able to save $26 million in costs.” Durak explained that they were only working with companies that have Q1 certification to improve quality in affiliated sectors. “The Q1 certificates also contribute to the capacity of our manufacturers in terms of new opportunities and competitive power in global markets. We aim to expand our business capacity, both in our own and in our affiliated sector companies. Also, implementing a lean production system has eliminated loss and has also minimized the period spent between order and delivery.”



Toyota:

Toyota is producing the Corolla Verso, Corolla Sedan and Corolla Station Wagon models in its Adapazarı plant. With an annual production capacity of 150,000 units, Toyota has started exporting 90 percent of its production to 30 countries, most of them in Europe. Toyota officials said production companies in the automotive sector have increased their production and exports in the past year. They believed this was a result of the overall improvement in the economy: “The stable situation in the Turkish economy has been welcomed by foreign investors,” an official said. “As long as this stability is preserved, foreign investors will make decisions to invest in Turkey with greater ease. As Toyota Turkey, we desire that the stability in the Turkish economy continues. We export 90 percent of our production. To be able to keep our competitive power, we continuously work on cost reduction.”