SAO PAULO, Brazil - General Motors has nearly finished picking suppliers for a radically new 'factory of the future' in Brazil.
In 1999, GM plans to produce a new entry-level car - code-named Blue Macaw - in a $600 million plant in Grazatai, Rio Grande Do Sul. The assembly plant will house about 20 suppliers that will produce major components on their own assembly lines.
The selection of key suppliers will be completed in about 90 days, said Marcos Munhoz, director of materials management for GM's Latin American Operation.
Those tentatively picked include such big players as Lear Corp. and Rockwell Automotive of the United States, Valeo SA of France, and Yazaki Corp. of Japan, a GM executive said. Delphi Automotive Systems, GM's in-house parts maker, is also on the list. (See list on Page 37.)
The project is GM's answer to Volkswagen AG's radical Plant B, which began producing trucks a year ago in Resende, Brazil. Plant B was instituted by former VW executive J. Ignacio Lopez. GM claims Lopez stole GM's plans for a factory of the future when he left GM for VW in 1993.
Last week, GM executives offered their first detailed description of Blue Macaw, in an interview with Automotive News.
Munhoz said the project - if successful - could be a blueprint for GM assembly operations in emerging markets.
'I believe the guys in Europe and in the U.S. see this as an experiment,' he said. 'But for us, it's an experiment that has to work.'
GM might set up a similar plant in Poland. However, Blue Macaw-style plants are less likely in established markets, such as Europe and North America, where demand is flat and unions are likely to resist.
In Brazil, the stakes are high because GM's two Brazilian vehicle plants are straining to keep up with booming demand for cars and trucks. GM's Corsa plant near Sao Paulo already operates 23 hours a day. Starting in September 1999, GM's new plant will produce 150,000 cars per year on two shifts. Production could be boosted to 225,000 with 24-hour operations.
GM KEEPS CORE OPERATIONS
Suppliers will produce all major component systems except powertrains, body welding, outer body panels, paint and final assembly. GM will retain direct control over those components. 'Those are core operations that we would never give to suppliers,' Munhoz said.
About 1,300 GM employees will handle those core operations, and suppliers will supervise an additional 1,300 workers. If the plant adds a third shift, GM's work force would expand to 2,000 employees. GM's division of labor stands in contrast to VW's Plant B, where only 200 VW employees act as supervisors for the suppliers' workers.
GM will allow other suppliers -not more than several dozen - to ship parts to the plant in traditional fashion. For example, GM might allow off-site assembly of some electronic components, so the supplier would not have to build a new facility at huge expense.
'It would be stupid for those suppliers to duplicate existing facilities,' Munhoz said. 'It would require such a huge investment.'
MODULAR IS A MUST
However, components such as seats, instrument panels and suspensions could be assembled on-site, he noted. GM said that to make the project work, it needs suppliers with sophisticated understanding of modular assembly.
'This is a project for clever multinational companies,' said Frank Satkunas, purchasing manager for GM do Brasil.
GM decided to locate the plant in Grazatai to be near markets in Argentina, Uruguay and southern Brazil.
Moreover, that region of Brazil has an educated work force and lower wage rates than Sao Paulo, Brazil's most industrialized region. A typical GM worker in Grazatai will earn about $9 per hour in wages and benefits. Although GM and Volkswagen are producing different vehicles in different quantities, the two plants will inevitably be compared. Volkswagen opened its plant first, but it still produces trucks in small volume.