Financial Daily from THE HINDU group of publications
Thursday, Apr 08, 2004
Corporate - Outlook
GM to make India low-cost supply base
Seoul , April 7
THE world's largest car maker, General Motors (GM), plans to develop India as a low-cost manufacturing hub for cars even as capacity constraint in the country is hindering the company's plan to source more auto parts.
"I can't see why it wouldn't (be possible)," GM Vice-President for Manufacturing for Asia-Pacific, Mr Robert J. Moran, told presspersons when he was asked whether the company wants to develop India as a low-cost manufacturing hub just as Hyundai has done.
The company wants to create a supply base in India, which is critical to GM's plans. "Business wise it is the right thing to do," he said.
The high-cost parts need to be made locally to become more competitive. Mr Moran said the company had divided its global manufacturing system into 33 categories and standardised the systems.
However, GM Director for Purchasing, Mr Nak Jong Lee, said capacity constraint in India was hindering GM Daewoo from sourcing more auto parts from the country. Currently GM Daewoo has only one supplier from India who supplies cylinder block casting for engines worth around $1 million every year.
Interestingly, it had only 10 suppliers from China. But it is because of the huge local demand in China, which even the suppliers find it hard to meet.
Mr Moran said GM already had a technology centre in India, which indicates the global manufacturing strategy of the company.
The company had last year announced that it planned to invest around $21 million every year over the next three years in facilities and technical infrastructure for the technical centre. The centre will work in tandem with the company's engineering centres in Europe, South America and China. The research and development wing will focus on math-based tools, lightweight materials, robust manufacturing processes, automotive electronics and controls system. Analysts say that eventually, GM will use the centre to help it build cars especially for the region.
The company had recently appointed GM Daewoo Vice-President (Engineering), Dr Ki-Joon Yu, as engineering functional leader for GM Asia Pacific. He will help integrate and leverage the technical centre in Bangalore with other Asia Pacific engineering centres. Mr Nak Jong said GM Daewoo had 275 domestic suppliers who supply parts worth $2.7 billion every year while there were 97 overseas suppliers who supply parts worth $0.5 billion.
GM plans to reduce costs by as much as 20 per cent over the next three years as part of its road map which involves sub-contracting purchasing from lower cost countries.
He said even though the largest Korean steel maker had recently increased prices by around 12 per cent and was set to do it again soon, GM Daewoo would not pass on the hike to its customers.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |
Copyright © 2004, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line