| BUSINESSWEEK ONLINE : JULY 31, 2000 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Super Factory--or Super Headache GM's new plant may build a lot of cars Brazil can't swallow Blue Macaw--that's the exotic code name for one of General Motors Corp.'s (GM) most closely guarded secrets. It's an auto factory, possibly the most modern in the world, built near the town of Gravatai in the Brazilian state of Rio Grande do Sul. After a four-year incubation, Project Blue Macaw took wing on July 20, when Brazil President Fernando Henrique Cardoso and GM's top brass inaugurated the plant. As the facility starts churning out a new subcompact, the Celta, GM executives will be able to observe their great experiment in manufacturing at work. If it succeeds, Gravatai will become a model for plants around the world. But there's a twist to this story: In Brazil itself, GM will probably face a glutted market that saps the ambitions of even the best carmakers. RECORD ROLLOUT. GM calls its new facility an ''automotive industrial complex.'' It's a mouthful, but the word ''factory'' alone would not do justice to this collection of 17 plants. Sixteen of the buildings are occupied by suppliers, including Delphi (DPH), Lear (LEA), and Goodyear (GT). Their job is to deliver pre-assembled modules to GM's line workers, who then piece the cars together in record time. Modular assembly is not a new idea. But according to John Caseca, an analyst at Merrill Lynch & Co. in New York, Blue Macaw ''pushes the concept of the modular car further along than anywhere else in the world.'' In fact, GM's suppliers had a hand in designing the Celta as well as the Gravatai complex. And according to Roberto Tinoco, the Brazilian GM executive in charge of Blue Macaw, modules delivered by suppliers make up 85% of the final value of each Celta. In a process he says is unheard of in the industry, the suppliers team up to build a single module comprising the motor, transmission, fuel lines, rear axle, brake-fluid lines, and exhaust system, which is then installed as one piece. Thanks to such innovations, the facility will be ''possibly the most productive in the world,'' Tinoco claims. While other carmakers are content with annual production rates of 30 to 50 vehicles per worker, GM is shooting for more than 100. If Gravatai lives up to its promise, it will roll out 120,000 cars per year on two shifts. That's equal to about 10% of Brazil's total market, of which GM already has 23%. Jose Carlos Pinheiro Neto, vice-president of GM in Brazil, says the company will sell the Celta not just in Brazil but ''anywhere it can.'' That may include Asia, Eastern Europe, and South Africa. The spartan Celta comes with a simple 1-liter engine and will probably carry a price tag of less than $8,000. Trouble is, the Celta may not have much of an appeal overseas. ''Customers are more and more demanding cars designed for their specific needs, and this is very much a car for the Brazilian market,'' says Merrill's Caseca. Besides, Asia is already coping with its own car glut. And transport costs and tariffs could make exports uncompetitive. GM has plenty of company in Brazil as well. Since 1995, veterans like Fiat, Ford (F), GM, and Volkswagen, along with newcomers Toyota (TOYOY), Honda, Renault, and DaimlerChrysler (DCX) have plowed some $20 billion into Brazil in a bid to capitalize on huge pent-up demand. Total vehicle production is set to soar, from 1.6 million units in 1995 to 2.8 million by 2005, according to projections by Standard & Poor's DRI, a Lexington (Mass.) research group that tracks the auto industry. Unfortunately for manufacturers, demand has not kept up with supply. The devaluation of the Brazilian real knocked vehicle sales down to 1.2 million units in 1999. Though sales are beginning to recover, analysts warn that glut will linger for years. ''Manufacturers invested heavily right ahead of the downturn, and there's no sign of anyone pulling back,'' says Nicholas Lobaccaro at Lehman Brothers in New York. That includes GM--it's spending $1.5 billion to modernize its plants in Sao Paulo state. In this race, it's betting only the superefficient will win. By Jonathan Wheatley in Gravatai _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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