GM shaves costs as suppliers move closer to plants
A General Motors Co. executive says the automaker has been successful in convincing some key parts suppliers to build factories closer to GM's assembly plants, which cuts transportation costs and helps ensure parts quality.
The Detroit automaker has persuaded some parts makers to locate nearby as it switches to next-generation vehicles at factories such as its Fairfax Assembly Plant in Kansas City, Kansas, said Grace Lieblein, GM's vice president of global purchasing and supply chain.
"Several suppliers we've been able to either locate there — or frankly, just get parts from a better supplier location," Lieblein said in a recent interview. "In many cases, as we started to put our eye towards this strategy, we've been able to work with suppliers to move the locations, so it's better for us, and frankly, better for them as well."
Magna International Inc. and Comprehensive Logistics Co. Inc. plan to open factories in Spring Hill, Tennessee, early next year to supply GM's Spring Hill Assembly Plant located less than a mile away. NorthPoint Development, based near Kansas City, is developing the industrial site that eventually could house another five parts suppliers, NorthPoint's president says.
The initiative means big dollars to GM, which is working to improve its North American profit margin.
Earlier this month, GM said it expects to save $700 million in material and transportation costs this year in North America, and save $900 million in 2015 and 2016.
Company leaders previously had stated they planned to trim material and transportation costs by $1 billion by 2016 in North America.
Chad Meyer, president of NorthPoint Development, said his firm is planning to create parks for GM suppliers near GM's Fort Wayne Assembly Plant in Indiana and its Lordstown Assembly Plant in Ohio. It already has purchased land near the Fort Wayne plant. The company also is looking to develop a park in the Dallas area; GM has a plant in Arlington, Texas.
"Kansas City and Spring Hill have been so successful, we're going to do this elsewhere," he said.
Meyer said by bringing suppliers closer to GM plants, it can boost on-time deliveries. He said GM's efforts to localize suppliers ultimately will save the company "hundreds of millions of dollars."
The supplier strategy isn't GM-specific and automakers such as Ford Motor Co. also have key suppliers located near their assembly plants.
"Pretty much for every auto OEM, they want them (suppliers) as close as feasibly possible," said Donald Rendulic, director of marketing for Ohio-based Comprehensive Logistics.
Comprehensive Logistics is locating two miles from Ford's Dearborn Truck Plant to provide sequenced parts on racks that are delivered to the assembly line to more efficiently build the 2015 F-150, Rendulic said.
The supplier is building a new $19.1 million plant on Wyoming in Detroit that is expected to open in about a month, Rendulic said. That plant is expected to create 240 full-time jobs; the company received a $800,000 grant from the state.
In Spring Hill, Rendulic said Comprehensive Logistics is investing $30 million in equipment and robotics in its new plant that will provide subassembly kits such as headliners and rear suspensions. He said the company won a new five-year contract with GM.
Magna will make seat assemblies for the Spring Hill plant, which currently builds the Chevy Equinox and recently landed the next-generation Cadillac SRX. Magna's plant is expected to be operational early next year; work is relocating from a nearby location in Columbia, Tennessee.
Magna reportedly is looking to build a plant near Lansing to supply GM plants. A Magna spokeswoman declined to comment on the possible plant that is being considered in Windsor Township.
Lieblein said GM wants body panels, fuel tanks, some stampings, instrument panels and seats produced a "very short distance from the assembly plant." She said GM's efforts around relocating supplier plants are tied to introductions of new vehicles, mostly in 2016 and beyond, and at plants that are outside southeast Michigan. The company hopes to move some supplier locations closer to its Arlington Assembly Plant in Texas and around its two plants in Lansing, she said.
"When you're in southeast Michigan, it's not as much of an issue because there is such a dense supply base around here," Lieblein said.
The automaker, in some cases, has been able to promise work to suppliers for two generations of automobiles instead of one, Lieblein said. She said suppliers are willing to make investments.
"When they're going to put money into a facility, especially if it's in a bit of an island relative to other parts, knowing that that capacity is going to be used for multiple generations is important," she said.
In a past generation of the Chevy Malibu, multiple interior pieces had to travel as far as 700 miles to the Fairfax plant. GM worked with three suppliers to locate their facilities closer to Fairfax, which GM said would save $66 million in transportation costs.
Johnson Controls Inc. built a plant in Riverside, Missouri, in 2010 to build seats for GM's Fairfax plant. A Johnson Controls joint business venture, Bridgewater Interiors LLC, in 2012 built a Lansing-area plant after winning work to supply seats for GM's Lansing Grand River Plant.
Jeff Williams, general manager of seats and supply chain for Johnson Controls Automotive Seating, said the parts maker must locate close to assembly plants to meet customers' fast sequencing orders that request seats in different colors and materials to match what is going down the assembly line.
NorthPoint Development's Meyer said construction is underway adjacent to GM's Fairfax plant with a company that will make gas tanks for the Malibu. He said other suppliers are located in Riverside, a short distance across the Missouri River, including Yanfeng USA Automotive Trim Systems. That company announced plans in April 2013 to build a new interior trim parts plant for GM's Fairfax and Wentzville Assembly Plant in Wentzville, Missouri.
Martinrea Riverside LLC, a subsidiary of supplier Martinrea International Inc., also plans to build a new plant in Riverside to supply GM's Fairfax plant with engine cradles and automotive assemblies.
And Southfield-based supplier Janesville Acoustics opened a new $13.4 million plant in Warrensburg, Missouri, to supply GM's Fairfax plant about an hour away; the Wentzville plant is about three hours away. The company makes acoustical and soft trim parts.
"A core strategy for Janesville is proximity manufacturing," Dave Cataldi, Janesville Acoustics president, said in a statement. "We have done this for other car companies through locations in Michigan and Missouri."