Signs of a greener industry: Subaru of Indiana recycles packing materials into vehicle insulation.
LAFAYETTE, Ind. -- Set amid tawny popcorn and soybean fields, weathered barns and rusty silos, the Subaru of Indiana Automotive plant cuts a swath.
A 3.4 million-square-foot monolith abutted by railroad tracks, the plant has a mountain of compost and the occasional coyote skittering through the surrounding 832 acres of woodland. Step inside, though, and you'll discover why this might be the most exemplary car factory in America.
In its 22-year history -- a period that has spanned three recessions, a global financial crisis, massive U.S. auto bankruptcies and the departure of Isuzu Motors Ltd., a founding partner, from the operation -- the factory has rolled out more than 3 million vehicles and has never resorted to layoffs.
Instead, it's given workers a wage increase every year of its operation. Staff members also enjoy premium-free health care, abundant overtime ($15,000 each, on average, in 2010), paid volunteer time, financial counseling and the ability to earn a Purdue University degree on-site -- all in a state that has lost 46,000 auto jobs and suffered multiple plant foreclosures in the past decade.
The plant, in Lafayette, Ind., has achieved all this through a relentless focus on eliminating waste.
"This is not about recycling or a nice marketing to-do," says Dean Schroeder, a management professor at Valparaiso University in Valparaiso, Indiana, who has studied the plant.
"This is a strict dollars-and-cents, moneymaking-and-savings calculation that also drives better safety and quality."
Green kaizen
Toyota Motor Corp. made kaizen -- the Japanese principle of constant "change for the better," with a special focus on efficiency, or "pushing lean" -- famous. Subaru of Indiana, you could say, has instilled green kaizen, or pushing green.
Starting in 2002, the unit of Tokyo-based
Fuji Heavy Industries Ltd. set a five-year target for becoming the first zero-landfill U.S. car factory. That meant recycling or composting 98 percent of the plant's waste, with an on-site broker taking bids for paper, plastic, glass and metals, and incinerating the remaining 2 percent that isn't recoverable at a nearby waste-to-fuel operation to sell power back to the grid.
Within two years, the results spoke for themselves.
"Everyone quickly saw the green dividend of not wasting anything," says Tom Easterday, Subaru of Indiana's executive vice president, passing a stack of yellowed foam cases that have survived four round trips around the globe. "You reduce packaging, negotiate a better deal from suppliers, and everyone then shares in the savings."
Reused boxes
Today, the plant abounds with boxes and containers scribbled over with marks that show how many times they have traveled from Japan to Indiana and back (and back again).
On a tour of the plant, Easterday sped a golf cart past a welder whose metal shavings are swept off the asphalt floors and auctioned into a roaring bull market for copper. Last year, Easterday says, the factory saved about $5.3 million by obsessively reducing, recycling, composting and incinerating.
Valparaiso's Schroeder calculates that Subaru saves multiples of that figure by using zerolandfill discipline to reduce worker injuries and fatigue. He cites the plant's switch away from taking cars apart to check the quality of welds -- a process that wasted metal and risked jackhammer injuries -- to ultrasonic technology that did so better, faster and far cheaper.
The factory's workers get bonuses, including the grand prize of a new Subaru Legacy, for pointing out excess packaging and processes that can be cut from the assembly line and then rebated by suppliers. All the savings are effectively plowed back into plant operations -- and overtime.
Lengthy training
To score a cherished "associate" position at the factor -- there's a 10-1 ratio of applicants to openings -- would-be employees are expected to put in long hours learning and practicing its low-impact manufacturing.
That means scrutinizing every byproduct, from welding slag to plastic wrap, for savings. And obsessively slicing seconds off assembly procedures. And a willingness to work whole months of six-day shifts, and likely years on the graveyard shift, while resisting the siren call of unionization. The United Auto Workers has failed three times to organize the plant's workers.
There's always a catch, and at Subaru of Indiana, it's this: All that ultra-efficiency, when applied to employees, can lead to unforgiving schedules.
The plant's workers, who start at just over $14 an hour and peak at about $25 an hour, put in 47-hour workweeks that include two Saturdays a month at time and a half -- good for $50,000 to $60,000 a year in per-employee salary.
That means roughly 100 employee salaries were protected by the $5.3 million zero-landfill rebate.
Ups and downs
The upside: When the Japan earthquake interrupted the supply of parts in March, slowing down the plant's breakneck output, Subaru of Indiana was able to keep paying workers in full to volunteer in town.
The downside: "Everyone's burned out here," says Kay Tavana, a 48-year-old who installs air bags and headlights. Not that she isn't grateful for the work and the plant's perks.
Working while on chemotherapy for a blood disease, Tavana avails herself of the factory's free gym to rev up for her shift from 4:30 p.m. to 3:30 a.m.
The cost savings and social programs at Subaru of Indiana wouldn't amount to much if Subaru's cars weren't in demand. From
2008 through 2010, U.S. unit sales jumped 41 percent, while last year the company's 22 percent rise in vehicle sales was double the broader car market's increase.
'Job security'
"You get worker commitment to productivity by offering job security," says Kristin Dziczek, who studies labor issues at the Center for Automotive Research in Ann Arbor, Mich. "But the best job security is still a product people will buy."
With the Subaru plant operating at maximum capacity and with an expansion plan under way, Easterday says that this "experiment" in the middle of Indiana corn country could someday export its American-made Japanese cars to the rest of the world.
For Schroeder, the Valparaiso professor, his case study of the factory left him convinced that "Dumpster diving can be great for business."
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