IMPACT OF NEW PRODUCT INTRODUCTION ON PLANT PRODUCTIVITY IN THE NORTH AMERICAN AUTOMOTIVE INDUSTRY

Using 7 years of plant-level data for the North-American automotive industry, we empirically study productivity losses during new product launches. Using propensity scoring, we estimate an average productivity drop of 20% during the year of a new product launch, and we find that this reduction in productivity remains relatively unchanged over the 7-year horizon, i.e., the manufacturers do not seem to improve. We do not find statistically significant differences among manufacturers with respect to the decrease in productivity. After controlling for the endogenous choice of launch plants, we identify several possible ways to mitigate this productivity decrease. Product flexibility in the body shop is found to mitigate more than a third of the productivity loss. Furthermore, a plant’s previous experience with product launches and a plant’s experience with the product platform are found to mitigate productivity losses even further. But while the positive impact of platform experience persists over time, the e...