GM raises goal for China parts

By Julie Armstrong, Automotive News

Detroit, Michigan-Now that General Motors believes the quality of Chinese-made parts is rising, the automaker will sharply increase the purchase of Chinese components for use in its assembly plants around the world.

In five years, the company expects to buy $4000 million worth of Chinese parts annually for GM assembly plants outside China, up from $200 million last year. It expects to use an additional $6000 million in Chinese parts for its operations in China, more than double last year's levels.

Bo Andersson, GM's vice president of worldwide purchasing, made those projections during an interview at the Detroit auto show.

Radios and other electronic components are likely candidates for export, Andersson said. “We're not exporting it yet, but the largest opportunity in China is radios because all consumer electronics are made there,” he said.

GM uses about 200 suppliers in China. Top vendors include international suppliers that set up local joint ventures there. Companies including Delphi Corp., Visteon Corp., Lear Corp., Johnson Controls Inc. and Magna International Inc. operate factories in China.

International joint ventures account for 75 percent of GM's parts purchases in China. Domestic Chinese suppliers account for 25 percent of GM's purchases. Andersson said he does not expect that percentage to change.

Red-hot market

Most of the parts purchased in China will continue to be shipped to GM assembly plants in that country.

That market is red hot. GM sold 386 710 vehicles in China last year, up 46 percent from 2002.

To keep up with demand, GM expects its annual Chinese parts purchases will rise to $10 billion by 2009, up from $3000 million last year.

Andersson has a $130 billion annual purchasing budget.

China's rapid growth has kept North American suppliers busy, too. Factories in North America export electronics, axles and exhaust systems to GM assembly plants in China. Forty percent of the components used in GM's Chinese assembly plants are exported from North America.

“That's the thing that keeps me up at night,” Andersson said. “I have to make sure we can build enough components to deliver to the Chinese factories, because volume is up 20 percent every year.”

Higher quality

Andersson says the quality of components produced in China has improved dramatically. Cars produced in GM's assembly plant in Shanghai are nearly equal in quality to vehicles produced in the US, he says.

GM keeps a quality scorecard for plants in the 40 countries in which it has operations.

Last year, Shanghai General Motors detected 23 problems per million parts, compared with 22 per million in the US and 35 per million overall. That's a huge improvement, Andersson says. Five years ago, Shanghai General Motors detected 2197 problems per million components.

Scores at Shanghai General Motors, GM's largest joint venture in China, are important because GM is investing heavily to become the No. 1 automaker in China. As of late 2003, GM owned 7.8 percent of the market.

“If you look at (sales) forecasts, China will pass Japan by 2010,” Andersson said. “If we want to be the largest automaker in the world, we need to be the largest in China, too.”