Kaizen Mindset at the Head of Chrysler

The October 24, 2005 Wall Street Journal article At Chrysler, Profits Don’t Keep Chief From Cutting Costs has a funny title. Why would profit keep you from cutting costs?
Not everyone thinks like Taiichi Ohno, who gave chapter 14 of his book Gemba Keiei (Workplace Management in English) the title “Cut Costs When Business is Good”. Chrysler chief executive Tom LaSorda is cut from the same mold. Even at a time when Chrysler is the only U.S. automobile manufacturer making money, he is requiring budgets to be trimmed by 5% to 10% this year and next.
The WSJ article points out that the burden from healthcare costs for Chrysler is less than that of GM, though still adding significant cost to each vehicle. About his choice to pursue cost cuts even in relatively good times, LaSorda is quoted as saying “When you’re forced to do more with less you’ll get creative and innovative and do only the things that are important.” Spoken like a true believer in kaizen.
When talking about an initiative to cut out unnecessary meetings and bureaucracy, LaSorda sounds like an ‘old hand’ kaizen consultant. “Take people off the distribution list,” he says. “If no one calls up, they didn’t really need it. And you can spend your time on more important work.” Try this at your company. It works.
The article give an example of a video report costing $2 million that was cut out at Chrysler. This is small compared to similar savings at GM reported by Beau Keyte, a Lean consultant on the project. General Motors has been using Value Stream Mapping and other Lean principles to cut out administrative costs reported to be as much as $3 billion per year and in one instance saved approximately $200 million by halting the printing of catalogs for dealers.
LaSorda shows he has the kaizen mindset when the article quotes him as saying
“Repeated over and over these little cuts can boost the bottom line — and set a tone within the company.”
Other major points in LaSorda’s cost cutting include keeping design costs and capital investment costs down and avoiding the mistake of hiring to boost capacity during good times. It will be interesting to see if he succeeds at doing more with less, particularly on this last point.
Tom LaSorda seems to have the kaizen mindset and the Lean manufacturing chops to bring about a change of both cost structure and culture at Chrysler. There are plenty of lessons around him in the automotive industry (both good and bad) to learn from if he can keep a humble attitude and open mind.