In this August 2007 file photo, the new Dodge Caravan and Chrysler Town and Country minivans roll off the assembly line at the Chrysler Assembly Plant in Windsor, Canada. - File

DETROIT (AP):

Detroit automakers - and Chrysler in particular - nearly erased the North American productivity gap with their Asian rivals in 2007, thanks to worker buyouts, leaner plants and other improvements, but they still make less money per vehicle because of higher costs, according to the Harbour Report on manufacturing released on Thursday.

Toyota Motor Corp. and Chrysler LLC led the industry in productivity, with each averaging 30.37 hours to fully assemble a vehicle. That was a 7.7 per cent improvement for Chrysler from 2006, but a 1.5 per cent drop for Toyota. Toyota's inefficiencies were largely due to the rapid shift away from trucks and sport utilities as gas prices rose, according to Ron Harbour, a partner in the automotive consulting firm Oliver Wyman, whose father began producing the annual Harbour Report in 1994.

Honda Motor Co, General Motors Corp, Nissan Motor Co, Ford Motor Co, followed Toyota and Chrysler, with a productivity gap of no more than 3.5 hours, down from a gap of as much as eight hours five years ago.

Restructuring

GM, Ford and Chrysler are in the midst of significant restructuring that have included 35 plant closures and the buyouts of more than 89,000 manufacturing workers since 2005. GM said this week it will close four North American plants by 2010, and Ford recently announced production cuts and layoffs because of a steep drop in SUV and truck sales.

Harbour said the Detroit Three's ability to improve productivity under those circumstances has been impressive and will help them as competition grows fiercer and consumers move to smaller, less profitable vehicles. Harbour said automakers have to sell as many as 10 small cars to squeeze the same profits they can get from one truck or SUV.

Still, the Detroit Three are lagging in profits per vehicle because of higher costs for health care, pensions, sales incentives and the higher number of dealerships they support. Ford lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412, the report said. Toyota made $922 per vehicle, while Honda and Nissan both made $1,641.

That gap is expected to narrow significantly in 2010, when the Detroit automakers hand over their retiree health care liabilities to new independent trusts overseen by the United Auto Workers union.

The report is closely watched by the industry, but Harbour said the data is important to consumers, too, since improved productivity frees up money that can be plowed back into vehicle development and improved value.

Productivity improvements also usually correlate with improvements in quality, since automakers can cut back on overtime and time spent repairing mistakes when their vehicle quality is better.