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 Dauch Manufacturing Maestro

By Tim Newton

Richard E. DauchThe landscaping and greenery surrounding the world headquarters of American Axle & Manufacturing suggest that this is no ordinary manufacturing plant.

This is no ordinary company, either. Formed in 1994, American Axle & Manufacturing is one of the top 30 automotive suppliers in the world, and it is traded publicly on the New York Stock Exchange. Its co-founder, chairman of the board, and chief executive officer, Richard E. Dauch, IM '64, HDR '99, is pleased with his company's growth and success, but not surprised. A 37-year veteran of the automotive industry with General Motors, Volkswagen of America, and Chrysler, Dauch understands the world of automotive manufacturing like few others.

Once described as "part Marine, part preacher, part salesman, with a very public personality," Dick Dauch manages with a style best summarized on a plaque that sits on his office conference table: "The One Who Says It Cannot Be Done Should Never Interrupt the One Who Is Doing It."

Dick Dauch was destined for a life in manufacturing from an early age. The youngest of six children, Dauch was born in Norwalk, Ohio, where his family ran a small dairy farm. He says he regularly walked past a General Motors plant as a toddler, and he soon became interested in learning how products were made. By the age of 9, he says, he knew he wanted to be a manager in industry.

"I had a chance to tour a number of factories when I was small," he says casually from the end of a conference table in his Detroit office. "I learned very early that I liked to work with people and that I was interested in producing a product."

With his father in the insurance business, Dick moved around the state of Ohio, from Norwalk to Clarksville to Ashland, where he graduated from high school. A football and track standout, Dauch had 44 full-ride scholarship offers. He narrowed the list by determining which schools offered industrial management degrees, eventually choosing among Purdue, Iowa State, Cornell, and a couple of other schools.

Dauch picked Purdue, playing for legendary football coach Jack Mollenkopf and earning a solid education in the technical side of management. While at Purdue, Dauch married his high school sweetheart, Sandra Rule, and the pair left Purdue in 1964 with two sons, Rick and David.

The new college graduate had an immediate decision to make. He had a chance to play in the National Football League for the legendary Vince Lombardi and the Green Bay Packers, but opted instead to join General Motors through the company's entry-level college graduate training program. In his 12 years with GM, Dauch moved through the ranks quickly and became the youngest plant manager in Chevrolet's history. He also got valuable experience in the trucks division, which at the time constituted just 10 percent of the GM fleet. (Today, trucks make up half of GM's stock.)

At age 33, Dauch was on the fast track to success. He was also wary of what he perceived as a slowdown in the company's global advancement. With a desire to gain more international experience, he joined Volkswagen of America in 1976. As group vice president of manufacturing, he planned and created the manufacturing facilities for the first high-volume automotive transplant firm in the United States. Dauch's star was rising, and he was in demand throughout the automotive world.

No one needed Dauch's help more than Lee Iacocca. Chrysler's manufacturing operations were in total disarray in 1980, losing money to the tune of $6 million to $7 million per day. When Dauch investigated the situation, he found the company was squandering more than money.

"The people there had lost their spirit and commitment to win," Dauch says. "But I thought it was a situation that we could change. Lee Iacocca is a great communicator, and I knew he could deliver the message if we could deliver the product. We told our workforce that quality was sacred and value was sacred and we needed a total commitment from everyone to turn things around."

The results were staggering. Chrysler went from a $6 million to $7 million deficit per business day to a daily profit of the same amount. (Dauch still treasures a bottle of black ink Iacocca gave him to signify the first dime of profit, a bottle that took more than two years to earn.) Dauch planned and directed the implementation of Chrysler's just-in-time materials management system and three-shift assembly system capability. Under his leadership, the company experienced a manufacturing renaissance, doubling productivity and reducing first-year warranty claims by 65 percent.

Dauch retired from Chrysler in 1991. He wrote a book, Passion for Manufacturing, which was a highly personal account of his manufacturing and management philosophies. The book, distributed in 80 countries and several languages, was called by the Detroit News as "probably the best American collection of sensible advice since Benjamin Franklin's Poor Richard's Almanac."

Dick Dauch is not afraid to give advice and spread his philosophies. He shares a number of "Dauchisms," including TMT/TME (Tell Me the Truth and Tell Me Early) and his belief in the four T's: Teamwork-Training-Technology-Trust ("You can't build the fourth without the first three," he says).

Richard Dauch

Sports taught Dauch that heritage meant little. "No one gives a rip where you came from," he says. "When you line up for every play, you'd better be ready to perform."

Dauch at campaign cabinet

Dauch helped kick off the Krannert at the Frontier campaign cabinet with a $5 million pledge and his services as chair of the campaign cabinet.

Dauch Family at the Rose Bowl

A loyal Purdue sports fan, Dauch gave $1 million to Purdue Intercollegiate Athletics. Twenty-six of Dauch's family members went to watch the Boilermakers play in the 2001 Rose Bowl. 

Every inch in his office is put to strategic use. There are "bitin' bullets" in the upper right corner of his desk. Several plaques and pictures adorn the paneled walls: an autographed photo taken at the inauguration with President George W. Bush, citations from several charitable organizations, aerial pictures of company headquarters. For each memento on the wall, another rests in Dauch's closet, awaiting hanging.

A family photo just inside the doorway reminds him to plan ahead. "That's my uncle, Jake Dauch, from Sandusky, Ohio," Dauch says, pointing to a large figure in the picture. "He had a successful business, but he didn't have any succession plan. One day he was killed in a car accident, and the business died with him.

"I developed a succession plan for American Axle & Manufacturing in 1993, and I want to make sure there is a smooth transition to the next generation. My sons are learning all the different jobs in the business, so they'll be ready."

Dauch was done with Chrysler in the early 1990s, but he was far from finished in the automotive industry. In 1992, General Motors moved to sell 18 operations from its Automotive Components Group. Along with a pair of investors, Dauch bought GM's axle, forge, and propeller shaft driveline business.

Before the purchase, Dauch had to convince the current GM employees in the division that he was the man with the plan to make the company go. "Starting in 1993, we met with hundreds of people face-to-face on the factory floor," Dauch says. "They all had one of four choices: work for us, stay with GM, quit, or retire. When it was all said and done, we had a workforce in the area where the median age had dropped about 15 years, and the average education level had gone up four years. We're proud of that. We try to dispel a lot of myths about factory life and bring a higher respect to manufacturing."

With a team behind him, and after 14 months of intense negotiations with GM, Dauch turned American Axle & Manufacturing (AAM) into a reality in 1994. Ignoring advice to move the company out of Detroit, Dauch poured millions of dollars into renovating and repairing the existing manufacturing facilities. 

In its seven years of existence, AAM has expanded from five core North American plants to 22 locations in seven different countries and four continents, and from 7,000 employees to 12,000. Though it was not on the manufacturing radar screen in 1994, AAM is today one of the top 15 automotive suppliers in North America and one of the top 30 in the world. The company does about $3 billion annually in sales. It went public in 1999 and outperformed Wall Street in each of the first ten quarters after.

"Whether I'm in here or on the plant floor, I have a passion for this business, and I try to pass on that passion," Dauch says. "But you must have people who are self-motivated. When people tell me that they want to move up in the company, I remind them that two-thirds of promotion is motion. Get moving. Accomplish something."

The message seems to be accepted by AAM employees. The unionized company has never lost time in more than 120 million man-hours due to labor strife or discord.

Dauch's success in labor relations comes from a hands-on approach. Clearly at home on the manufacturing floor, he seems to know everyone's name and life story during a golf-cart tour of the facility. There's a world-champion powerlifter near the dock, a plant manager who played football at the University of Florida, and a 38-year veteran of auto manufacturing who still looks for new ways to save time and money on the floor. 

"It's a people game," Dauch explains, "not product."

He proudly points to the cleanliness of an operation that uses tons of oil. There is no blue smoke coming from the welding area. For a company that produces 11,000 axle shafts a day, very few people appear to be in certain areas of the operation, a testament to AAM's use of modern robotics.

But the machinery fades into the background as person after person stops the cart to shake the boss's hand. This is more like a politician greeting a throng than a CEO cruising through his facility.

If ever a manufacturing plant could be considered clean, bright, and cheerful, AAM would. Restrooms are located throughout the plant, an ATM machine sits along a wall, and workers can take advantage of a prayer chapel at the beginning or end of a shift. The company also has installed 13 parking decks for convenience and safety.

When AAM began operations, Dauch cleaned up the area around Holbrook Avenue, buying and bulldozing crack houses, bars, and brothels, leaving only nearby churches standing. Crime in the area has decreased 59 percent since the company's inception in 1994.

Dauch's competitive nature takes deep root in his love of sports. He uses sports lingo prominently as he explains his business philosophy. He favors hiring educated former athletes because "they understand hard work and teamwork." Electronic scoreboards throughout the plants feed him real-time data, and remind "associates," as Dauch calls his employees, that someone is keeping score. 

Dauch is proud of one number: zero. He says his company has not been involved in any litigation surrounding its products and has never missed a delivery. "I just flat-out don't believe in recalls, so we need to get it right the first time," he says, pointing to the fact that the tolerance allowed in production is often as small as one-fifth of a human hair. "I learned that kind of precision at Purdue."

Dauch has been very generous to his alma mater. While at Chrysler, he provided a $1 million challenge grant that was instrumental in the creation of the Dauch Center for the Management of Manufacturing Enterprises. He later pledged $6 million to Purdue, with $5 million to serve as a kickoff to the Krannert at the Frontier Campaign, and another $1 million earmarked for intercollegiate athletics. Dauch, who had 26 family members at the Rose Bowl, serves as chair of the Krannert at the Frontier Campaign.

He also believes in giving back to the community in which he works. AAM is heavily involved in Junior Achievement and scouting organizations, as well as Boys and Girls Clubs and local schools in Detroit. He has been recognized for his work inside and outside the business world, receiving the 1997 Newsmaker of the Year Award from Crain's Detroit Business magazine. 

"We're not a social company, but we do have a social conscience," Dauch says. "We are a guest of the community, and we always try to stay sensitive to local needs."

Dauch's sons stand ready to help take over the family business, but the 59-year-old father of four and grandfather of 14 appears in no hurry to leave. He's just extended his contract through 2006, and it's hard to imagine a rocking chair anywhere in his near future.

Back in his office, Dauch reflects on lessons learned along the way. "People at the top of the organization said the minivan would never work, but it saved Chrysler. That taught me that you should never let people from above intimidate you. Do what you think is right, not what you think is popular," he says.

He also believes in taking nothing for granted. To illustrate the point, he pulls out a story he reads to his associates each year:

Have a Love Affair
You say you love me, but sometimes you don't show it.
In the beginning, you could not do enough for me.
Now you seem to take me for granted.
Some days I wonder if I mean anything to you at all.
Maybe when I'm gone you'll appreciate me and the things I do for you.
I'm responsible for getting food on your table; for the clean shirt you wear; for the welfare of your home; for the thousand-and-one things you want and need.
Why, if it weren't for me, you wouldn't have the car you drive.
I've kept quiet and waited to see how long it would take for you to realize how much you really need me.
Cherish me ... take good care of me ... and I'll take good care of you.
Who am I? I'm your JOB!

It's a job that permeates Dauch's soul.
"Working in the auto industry has been a constant pressure-cooker, full of stress," he says with a smile. "And I've loved every second of it."

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