Carved out of the red clay of the Brazilian countryside, the shiny new industrial park impresses at first sight.
Freshly paved roads wind up to the manufacturing complex in Gravatai, a rural town of 30,000, a place where horse-drawn wagons and grazing burros mix with just-opened commercial developments such as a Best Western hotel. Nearby, 16 supplier factories dot the landscape surrounding General Motors' new Blue Macaw assembly plant. The factories churn out instrument panels, seats and other components for the Chevrolet Celta, a simple vehicle aimed at Brazil's growing market.
The low-priced Celta was designed to be assembled in modules. Suppliers do much of the work, delivering their modules to GM for final assembly. The result: a $556 million manufacturing complex that requires 60 percent fewer suppliers and 50 percent fewer parts than a traditional manufacturing setup.
The role these suppliers play is the real story behind GM's newest assembly plant. General Motors and other automakers increasingly depend on suppliers to handle design, engineering and even final assembly. This approach is an especially bold move coming from conservative GM, said Sten Sorensen, president of VDO do Brasil, which invested $28 million in its factory here.
'What you're seeing at this site, in my opinion, is a silent revolution,' Sorensen said.
To reduce costs, GM used these four strategies:
Suppliers took more responsibility for design. This cut engineering costs.
The car is simple. The Celta only has two trim lines and 20 possible variations. For example, the car is not equipped with a heater because motorists in the tropics do not need one. Most components are bought locally. Only 14 parts in the Celta, a three-door hatchback variant of the Opel Corsa, are imported.
Transportation costs are minimal. GM found its major suppliers in an industrial park next to the assembly plant.
The modules allow GM to simplify its assembly line.
GM drew ideas for Blue Macaw from its new plants in Germany, Poland, China, Thailand and Argentina. For the past decade, GM has tried to standardize the basic layout of its new assembly plants. That allows the automaker to move innovations from one plant to the others. Blue Macaw gathers many of those innovations in one package, positioning it to become a key model for car making around the globe.
Here is how the Brazil venture works. GM stamps the car's body panels and welds them together in the body shop. Ninety-nine robots account for 90 percent of the car's spot welds. That is highly automated for an assembly plant in an emerging market. In contrast, body-shop robots in GM's new plant in Gliwice, Poland, make 16 percent of the welds, and its new plant in Rosario, Argentina, handles 32 percent of the welds. At GM's plant in Eisenach, Germany, robots perform 95 percent of the welds.
From the body shop, vehicles are carried on a conveyor to the paint shop and on to general assembly. Suppliers are given from 30 minutes to 21/2 hours to deliver their modules to the plant. An independent logistics company oversees the flow of parts to Blue Macaw's T-shaped assembly line. There, components are wheeled on orange carts and snapped in place on the car's body. Inventory is kept to a minimum. Typically, two component carts are kept near each assembly station on the line.
'We are handling much less material than we would have in a traditional plant,' said Paulino V.N. Varela, production manager at Gravatai. 'That saves us time and logistics. It improves quality. It gives us faster assembly time.' It also allowed GM to build a smaller assembly plant. Blue Macaw is contained within 80,000 square meters, about half the size of the typical U.S. car factory.
With the help of robots, young Brazilians working the line install the modules. A VDO instrument panel, for instance, is bolted at 15 points in minutes. Made in a building just 600 meters away, the module includes heating and ventilation systems, instrument clusters, steering system and brake controls. What would have been more than 300 parts has shrunk to one for GM to handle.
In another departure from tradition, General Motors also lets a supplier handle a portion of the final vehicle assembly. Lear workers take off the car doors and send them on a conveyor to an 743-square-meter, Lear-controlled assembly area. There, Lear workers install locks, windows and other components. Then the doors are sent back and reattached to the vehicle on the main assembly line.
The relationship marks the first time GM has put a supplier on one of its assembly lines. It is rare for the automotive industry, but it has been done. A more radical example can be found at Volkswagen AG's commercial truck plant in Resende, Brazil. There, eight suppliers assemble components inside the factory and attach them to the vehicle as it travels down the line.
Meanwhile, Ford Motor Co. is building its own supplier-integrated assembly plant, called Project Amazon, in the Brazilian state of Bahia. Ford already operates a few European assembly plants surrounded by supplier parks. At Ford's assembly plants in Valencia, Spain; Genk, Belgium; and Saarlouis, Germany, parts makers are linked to the assembly line by conveyors. DaimlerChrysler also operates a Dodge Dakota plant in Curitiba, Brazil, where Dana Corp. supplies a complete rolling chassis.
With a more flexible labor climate than North America or Europe, Brazil seems especially suited for these experimental plants. Moreover, the country's shoddy roads and inadequate railroads make close cooperation with suppliers even more important. 'I think it will take a few years of experimentation, but I won't be surprised at all if we have the model for how automotive assembly should work coming out of Brazil,' said John Shook, a partner in the Lean Enterprise Institute of Brookline, Massachusetts.
Celta assembly may mark one of the first times an automaker has turned a complete interior program over to a supplier, said leaders at Lear, which also provides the car's seats and headliners.
'We kind of see this as an emerging trend, not just for emerging markets, but perhaps for the more mature markets, North America and Europe,' said Doug DelGrosso, Lear senior vice president and head of the company's North American and Latin American operations. 'Suppliers (will be) doing more and more total interior integration and total delivery of the product.' Indeed, GM intends to use Blue Macaw as a laboratory of sorts for its worldwide manufacturing operations, GM executives say. But the extent to which its ideas are adopted elsewhere depends on the market, product and labor environment.
The next two assembly plants planned by GM - both in Lansing, Michigan - may include many of the elements of Blue Macaw. Though the local union officials in Lansing are considered progressive, the Brazil model is viewed with suspicion by senior officials of the United Auto Workers. When GM proposed a new generation of U.S. assembly plants based on Blue Macaw, those union leaders objected. The UAW did not want to let GM shift jobs from its assembly plants to lower-paying suppliers. The union also feared that GM would let suppliers handle some jobs inside its own assembly plants. The project - dubbed Project Yellowstone - was officially scrapped.
The Lansing plants will be built, and suppliers will play a greater role than before. But suppliers will not have as great a role as at Blue Macaw. 'I don't think (GM is) going to bring them into the plant right now,' said Ron Harbour, a manufacturing expert and president of Harbour & Associates of Troy, Michigan. 'Now, moving the work to a building across the street that has Lear workers, that's another story.'
But that is not what matters most in the Blue Macaw model, Harbour said. Most of the savings come from collaborative design and engineering, rather than assembly. GM intends to put that collaboration to work at its two new Lansing plants, as well, GM executive Mark Hogan said.'You really unlock creativity and innovation - in our (Celta) cockpit, for example, we were able to get more functionality at a lower cost,' he said. Hogan - now president of the automaker's e-GM group - was president of GM's Brazil unit when the Blue Macaw project was launched. He took those ideas with him when he became general manager of small-car operations for GM's North America Car Group in 1997, eventually initiating the ill-fated Project Yellowstone.
For the supplier industry, Blue Macaw also may serve as a step toward reversing the specter of Inaki Lopez. The former GM purchasing executive led the industrywide push for ever-lower prices from parts makers. Lopez later moved to Volkswagen before being exiled from the industry when he was accused of stealing GM secrets.
'You still have a lot of purchasing representatives chasing local piece prices as they were taught by Lopez,' said Shook, also a manufacturing expert at the University of Michigan. 'Yet you have a lot of projects moving forward like Blue Macaw, where you bring the suppliers in early to partner with them. Now the trick will be to merge those two trends.'
What is happening in Brazil is a step toward that, Harbour said. 'You've got suppliers out there saying: `You're asking me for price cuts. If you really want to reduce the costs of my components, give me more control over the design of those components.' ' In addition to lowering costs, involving suppliers early in vehicle design will improve quality, VDO's Sorensen said. 'If the process is simple, it's less prone to defects, to problems,' he said. With more control and an equity stake in the project, Blue Macaw's suppliers also benefit. 'GM gets products that are lower in pricing, and we will make more money from those parts,' Sorensen said.
Not all has been rosy in the development of Blue Macaw, though. One supplier, an undisclosed maker of stampings, left the project. GM, with lots of stamping capacity of its own, decided to make those components itself, said Fritz Henderson, president of GM Latin America, Africa and Middle East. They are being shipped from GM's stamping plant in Sao Paulo, Brazil.
Blue Macaw's supplier-owned factories also reduce GM's flexibility, should the automaker become dissatisfied with parts prices or quality, Henderson acknowledged. But GM has not guaranteed those suppliers contracts for the next-generation Celta. Nonetheless, Blue Macaw likely will foster more long-term relationships between supplier and automaker. 'By the time we get around to sourcing the next generation, they will be in the best position to win the business,' Henderson said.
What qualities did GM seek in its suppliers? 'We're not selecting suppliers based on the traditional way,' said Roberto Tinoco, director of manufacturing operations at Gravatai. For Blue Macaw, GM invited 60 major suppliers to Brazil for a peek at the Celta concept. Then those companies were asked whether they were willing to collaborate on the design and production of large modules. GM chose its suppliers, Tinoco said, on the strength of their engineering, international experience, financial resources and eagerness to innovate. For Lear, meeting those criteria involved more than door panel assembly.
'No matter how you look at it, there are going to be valuable lessons learned from this kind of a program, and I think you can take this forward to other programs as well,' Lear Vice Chairman Jim Vandenberghe said.
The company already is working on a number of other programs similar to Blue Macaw, Vandenberghe said. He would not speak of specific projects but did mention a complete liftgate the company is delivering to an automaker in North America. Lear also recently won a contract to outfit complete interiors of GM's full-sized luxury vans.
Such steps are challenging conventional thinking about how cars are made, consultant Harbour said. And with plants like Blue Macaw launching production, automakers will forge new relationships with their suppliers. 'This really is indicative of a much different approach of working with suppliers,' Harbour said. 'That's one of the best things that comes out of this.'
You can e-mail Automotive News Staff Reporter Amy Wilson at [email protected]