SAO PAULO, Brazil - General Motors has selected almost all its key suppliers for a radical new 'factory of the future' in Brazil. The $600 million plant at Grazatai, Rio Grande Do Sul, will build a new entry-level car, code-named Blue Macaw. Production will start in 1999.
The plant will house around 20 suppliers. They will make major components and modules on their own assembly lines.
The selection of major suppliers will be completed in about 90 days, said Marcos Munhoz, director of materials management for GM's Latin American Operations.
The list, which is still provisional, includes Lear Corp., Rockwell Automotive and Delphi Automotive Systems of the US, Valeo SA of France, and Yazaki Corp. of Japan, a GM executive said.
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 the creation of former VW purchasing executive Ignacio Lopez. GM claims Lopez stole GM's plans for a factory of the future when he left GM for VW in 1993.
Munhoz said the project could -if successful - provide a blueprint for GM assembly operations in developing countries.
'I believe the people in Europe and in the US see this as an experiment,' Munhoz 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.
Grazatai to build 150,000
GM's two Brazilian vehicle plants are struggling 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 units with three shifts.
Suppliers will produce all major component systems except the powertrain, body welding, outer body panels, painting and final assembly. GM will retain direct control over those areas. 'Those are core operations that we would never give to suppliers,' Munhoz said.
GM will have around 1,300 employees in the plant. Suppliers will supervise a further 1,300 workers. If the plant adds a third shift, GM's workforce would rise to 2,000.
The division of labor at GM's factory is very different from that at VW's Plant B, where only 200 VW employees act as supervisors for the suppliers' workers.
Although 20 suppliers will operate inside GM's plant, they will not produce all major components.
GM will allow other suppliers -up to 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.'
Modules are key
Components such as seats, instrument panels and suspensions could be assembled on-site, said Munhoz.
GM says 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. Auto workers in the Sao Paulo area get about $13 per hour.