Startup Rivian built around lean-manufacturing mindset

DETROIT — Upstart car ventures often begin with one question, according to Rivian Automotive CEO RJ Scaringe: "Let's look at everything we've done for 120 years — how do we do it differently?"

Rivian, a 10-year-old venture operating in suburban Detroit, plans to reveal its first products, an all-electric SUV and a pickup, at next month's AutoMobility LA. But Scaringe hasn't arrived at this moment by throwing out all of the rules. He has built Rivian around his fascination with leading automotive production processes gleaned from academia and an executive dream team.

"When I first met him, our first discussions were about production processes," said John Shook, Rivian board member and chairman of the Lean Enterprise Institute, one of the industry's leading think tanks on efficient vehicle and parts manufacturing. "He's not only enthusiastic about the product but also how to make things."

Scaringe, who grew up restoring classic Porsches, is betting that a deeply researched go-to-market plan, a team of industry experts and an operating philosophy rooted in Toyota's practices will give Rivian an edge in the market.

Scaringe founded Rivian in mid-2009 — "arguably the worst time in the world to start a car company," he said. The global economic recession and industry crisis were in full bloom. He started the venture shortly after finishing graduate studies at the Massachusetts Institute of Technology, where he focused on automotive engineering.

MIT has been a center for auto industry research since the 1980s. Scaringe's research allowed him to peek inside carmakers' operations, and MIT's academic network helped him secure investors and advisers such as Shook and other Rivian board members. The group includes Antony Sheriff, former McLaren Automotive managing director, and former Chrysler designer Tom Gale.

Those three board members were associated with an early-1990s auto industry phenomenon — a research project and book titled The Machine That Changed the World. The 1990 book awoke U.S. manufacturers to the efficiency of the standard operating system of the Japanese auto industry — in particular the Toyota Production System.

"TPS," as it is popularly known, offered a holistic approach of identifying and eliminating waste in product development, factory lines and their supply chains, and organizing companies around efficient daily routines.

It sounds obvious today, but in the 1990s the concept ignited a fury of excitement at companies all over the world, from General Motors to Daimler. Companies adopted TPS, but typically dropped "Toyota" from its name, referring to the new efforts instead as simply "lean" — a euphemism coined by the MIT team.

For Scaringe and Rivian, the lean mindset took hold in 2011 when the venture scrubbed its previous plan to produce a 2-by-2 electric coupe in order to pursue a new strategy focused on high-end, outdoor utility vehicles.

"We decided to focus on the aspirational side," Scaringe said. "A brand that can transcend the shifts away from ownership and steering wheels."

The company spent several years mapping the landscape of future cars, opting to move away from the performance vehicle space and into luxury utility where they envision less competition. In the next five years, Rivian will introduce at least four vehicles in that segment.

"Everyone wants to be lean from the start," Shook said. "They're using these techniques to prove that their product has a good fit with customers."

Scaringe also instituted a company culture that encouraged cross-department communication — for example, by bringing catered lunches into the office.

"We've structurally arranged ourselves in a way that removes the things that inhibit innovation," Scaringe said.

Rivian is entering a critical phase. It intends to launch its first products, begin production at a 2.6 million-square-foot plant in Normal, Ill., formerly owned by Mitsubishi Motors, and create a sales and subscription program without franchised dealers.

Other auto startups have encountered difficulties when they transitioned into mass manufacturing and retail operations, most famously Tesla. Tesla, which operates out of a former Toyota plant in Fremont, Calif., where Shook once worked, is facing challenges scaling up Model 3 production, as well as legal challenges over its direct manufacturer-to-consumer retail strategy.

But Scaringe believes his team of experts will help him navigate the waters. In addition to its board of directors, the company has head-hunted designers and engineers from McLaren and Fiat Chrysler, offering them the opportunity of a blank slate. Notable recruits include Rivian engineering chief Mark Vinnels, vice president of vehicle development Charles Sanderson and vice president of propulsion Richard Farquhar — all of them formerly of McLaren.

"To come up with a new brand identity? There are few opportunities to do that in the career of a designer," said Jeff Hammoud, vice president of vehicle design at Rivian and former Jeep designer at Fiat Chrysler.

The company's executive bench is an argument for industry veterans being valuable innovators in the startup scene. For instance, Shook traveled with Scaringe during one of his first visits to the former Mitsubishi factory in central Illinois, and later remarked on the executive's eagerness to inspect the location.

"His eyes were as big as saucers walking through the paint shop," Shook recalls of the Japanese-engineered auto plant. "He's not burdened by this legacy, but he is a student that loves the industry."