DETROIT -- Chrysler LLC tied Toyota Motor Corp. as the most efficient automaker in North America, while General Motors Corp. and Ford Motor Co. joined in virtually erasing the productivity gap between Detroit's Big Three automakers and their Asian rivals, according to the 2008 Harbour Report North America.

Matching Toyota's vaunted manufacturing efficiency stands in paradox to another report released this week showing Chrysler lagged the industry for initial quality -- even as Ford and GM made progress in that regard against Japanese companies.

Chrysler says it's already rolled out quality-improvement initiatives so it can match its productivity gains. All three Detroit automakers are challenged to produce their vehicles in North America profitably -- something none achieved in 2007.

All of Detroit's Big Three improved their productivity last year, with Chrysler showing the greatest improvement at 7.7 percent. The effort allowed the Auburn Hills automaker to tie Toyota at an average 30.37 labor hours to manufacture a vehicle. Toyota's productivity slipped 1.5 percent last year.

Chrysler "roared to the point where they are near neck and neck with Toyota," said Ron Harbour, a partner in Oliver Wyman's North American automotive practice, which releases the report.

The Harbour Report measures manufacturing efficiency through the number of hours it takes an automaker to produce a vehicle.

In 2001, Chrysler finished last in the Harbour rankings and stood 12.65 hours behind Toyota.

That year's report caused Chrysler to re-evaluate its manufacturing operations -- changes that have since born fruit, said Frank Ewasyshyn, Chrysler executive vice president for manufacturing.

More automation and newly implemented manufacturing techniques at plants in Toledo and Belvidere, Ill., propelled Chrysler ahead of GM, Honda Motor Co. and Nissan Motor Co. in this year's report. Both of those Chrysler plants, which recently launched new vehicles, ranked best in their class in the Harbour Report.

"The journey is never ending; our manufacturing operations will continue its focus on producing high quality vehicles that satisfy the needs of our customers," Ewasyshyn said.

Japanese automakers' North American plants have always produced vehicles more efficiently than the Big Three, but that gap has narrowed in recent years.

Ford cut its labor hours per vehicle 3.7 percent this year to an average of 33.88 hours, but still trails Toyota by the largest margin of the domestic automakers at 3.5 hours. General Motors Corp. trimmed its time 0.2 percent to an average of 32.96 hours.

"The gap from top to bottom has narrowed significantly," Harbour said. "We have near-parity in the industry. Fifteen years ago the gap was 2-to-1."

But the profit gap is still large and that's likely to become a bigger focus for automakers, Harbour said, especially as consumers shift from trucks and SUVs to less profitable small cars.

Nissan and Honda make $1,641 per vehicle while Toyota's per-vehicle profit has dropped to $922 from $1,266 last year. The Big Three fare less well: Ford loses $1,467 per vehicle; GM loses $729 and Chrysler loses $412.

Higher labor costs, and lower revenue per vehicle, due to higher incentives and many more dealers, account for the gap, the Harbour report said.

Those numbers are expected to improve as the new United Auto Workers labor contracts take full effect, further reducing the total labor cost gap over the next three years, the report said. GM, Ford and Chrysler negotiated historic contracts with the UAW last year that shift health care costs to a union-run trust fund as well as allow for paying new hires about half what veteran workers earn.

While Chrysler builds vehicles as fast as Japanese rivals, its quality pales in comparison. In J.D. Power and Associates' Initial Quality Study released Wednesday, all three Chrysler brands scored below average and Jeep ranked last among 36 brands. Two Toyota brands, in comparison, ranked third and fourth overall.

Harbour said Toyota and Honda typically do well in both studies because quality and efficiency are related. Poor quality often causes workers to make fixes and adjustments in the factory, which slows production.

Ewasyshyn said the two measures are not necessarily linked, but said improving quality is a top goal for Chrysler.

"It's not a matter of picking one over the other," he said. An effort to reduce the complexity of components and other initiatives should help improve Chrysler's quality, he said.

The launch of vehicles, such as the Dodge Caliber and Jeep Wrangler Unlimited, allowed Chrysler to update aging factories, which likely helped net efficiency improvements, said Stephanie Brinley, analyst with AutoPacific Inc. But those launches often come with quality defects, she said.

"Chrysler needs to take that cost reduction from their efficiency gains and transfer it to improving quality," Brinley said.

GM posted a smaller efficiency improvement, but several of its vehicles earned top honors in the J.D. Powers study, including the newly redesigned Chevrolet Malibu. The Malibu plant in Kansas City, Kan., also had above average productivity.

"Building higher quality products allows our manufacturing operations to run more efficiently by eliminating all forms of waste," said Gary Cowger, GM group vice president for global manufacturing and labor relations.

All of the Big Three automakers drew accolades for improving productivity even as they cut production.

"Ford's commitment to align capacity with the real demand, along with our disciplined processes, have contributed to Ford's productivity and quality gains during these critical times of volume decreases, changing product mix and reduced manpower," said Joe Hinrichs, Ford group vice president for global manufacturing and labor affairs.

Toyota giving ground on efficiency is largely the result of the automaker's increased production of pickups, SUVs and hybrids in 2007. Those more complex vehicles take longer to build. Toyota also does not lay off its workers. The Big Three's inactive employees do not count against productivity.

"We also launched a lot of new models," said Toyota spokesman Mike Goss. "So despite all that, we are pretty satisfied with the results, but at Toyota we are never really satisfied when it comes to productivity."