DETROIT – General Motors Corp.’s head of purchasing uses the Society of Automotive Engineers World Congress here to set the record straight on GM’s position with regard to automotive suppliers locating in the rapidly growing market of China.
Earlier this month, Bo Andersson, vice president-worldwide purchasing, and his top lieutenants spoke at a meeting hosted by the Original Equipment Suppliers Assn. and attended by more than 300 suppliers. Subsequent news reports suggested Andersson delivered a hard-line message demanding suppliers locate in low-cost China.
GM says the message was taken out of context, and that the auto maker is not forcing any suppliers to locate in the region.
However, at SAE, Andersson makes it clear GM intends to set up a capable stable of parts producers in China. The first priority is to serve the Asia/Pacific market, but eventually GM could source some parts from China for vehicles built in North America.
GM’s Bo Andersson says Chinese operations are not mandatory for GM suppliers.
“If you are a world-class runner, your competition is global. If you work at a supplier, your competition is global,” Andersson says. “One day you may compete, even in the U.S. marketplace, with a headliner made in China.”
Because he sees vast opportunities in Asian sourcing, Andersson says it is wise for suppliers to take advantage of the region’s cost structure. But he notes such a strategy is not mandated by GM.
He says some of GM’s best suppliers are in Michigan, citing Gentex Corp. of Zeeland, a regular favorite of Andersson’s.
Andersson says GM sources 99% of parts for its cars built in North America from the region. That includes $41 billion for parts built in the U.S., $10 billion for parts made in Mexico and $10 billion for parts from Canada.
“We are a global company. We have suppliers in 11 different areas of the world today, and everywhere I go, the suppliers think I owe something to them,” Andersson says. “Bottom line is, most of our suppliers are U.S. corporations, and that’s the way we try to keep it.”
GM plans to continue sourcing parts in the regions where it assembles vehicles, but every region must be cost competitive with the other.
“Take the Europeans,” Andersson says. “I would like the Europeans (GM Europe) to buy seatbelts in Mexico, but they like to buy them in Europe. We have a lot of weaknesses, but local production buying is not one of them.”
As GM advances with its global strategy, the auto maker is attempting to build more of the same vehicles around the world.
“What I would like to do is engineer the part once, validate it once through one supplier and get it from that supplier locally,” Andersson says.
“What typically happens today is we design parts differently, we source them differently and suppliers validate them differently. If we want to build a Cadillac in China, I want to have the same Cadillac in China as here, with the same suppliers... It should be the same part, same tool, same validation.”
The benefit, he says, is reductions in lead time, cost and risk.
In his SAE speech, Andersson specifically highlights South Korea, Mexico and Eastern Europe as regions GM would like to see developed as export bases.
“These countries will export more automotive parts,” he says later. “These governments are supporting their automotive industries much more than other countries. The exception maybe is Canada. Canada has done a very good job the last 10 years supporting the automotive industry.”
Andersson says he expects Mexico will grow its number of auto parts exported to the U.S. in the same way Eastern Europe will supply the mature Western European market. He sees South Korea and China growing as an export base, but primarily for the Asia/Pacific region.
“If I have one priority, I want to get (South) Korean parts to Australia before I get them to the U.S.,” he says. “I want to get Chinese parts to (South) Korea before I get them to the U.S. Our operations in China are three hours away by plane to (South) Korea. Why try to get them (parts) to the U.S. if you don’t have them in (South) Korea yet?”
Still, China – with its low-cost, plentiful labor – is tantalizing for any company that purchases auto parts. Andersson tells Ward’s GM pays about $150 each for headliners produced in North America. The same headliner, he says, could be produced in China and shipped to the U.S. by air “first class” for less money.
Andersson also heads up supply-chain logistics for GM – a job he blames for his emerging gray hair. “If we need to transport parts, maybe we fly more because that may be where the future is,” he says. “But having stuff on a ship for three weeks and going in and out of ports, offloading and onloading, is not a very nice experience.”
There are only a handful of large, complex components that GM intends long-term to purchase or produce in North America for U.S. assembly plants. Engines, for instance, generally are manufactured regionally, but the Chevrolet Equinox cross/utility vehicle gets its 3.4L OHV V-6 from China.
“We will always buy seats locally,” he says. “The trim cover today is coming from Mexico. Tomorrow, maybe it comes from China.”
David Andrea, vice president-business development for OESA, attended the earlier OESA meeting and confirms Andersson said GM and its suppliers are mutually dependent on one another, and that GM needs suppliers that are globally competitive.
To be globally competitive, Andersson told the audience, suppliers need to factor in the “total landed cost” of shipping parts overseas, which includes logistics, inventory-carrying costs and supply-chain disruption risks.
“You look at all that, and China becomes just one piece of the global-sourcing puzzle,” Andrea says.