General Motors Faces Challenges in Manufacturing in South Africa

Strategic Insights -

General Motors' (GM) local assembly plant in South Africa remains committed to operation, despite facing significant challenges, including the high costs of sourcing vehicle parts. Nick Reilly, president of GM International Operations, highlighted the importance of a competitive local component supply base, urging domestic suppliers to rationalize and improve their offerings.

Key Takeaways:

  • The high cost of sourcing vehicle parts is a significant challenge for GM's South African manufacturing operations.
  • The company aims to localize as many components and parts as possible, but faces an uncompetitive component supply base.
  • Nick Reilly, president of GM International Operations, has urged domestic vehicle component makers to become competitive and rationalize their operations.
  • The Automotive Production and Development Programme is being lauded as a support mechanism for local component producers, with the potential to strengthen the local component supplier base.
  • Stevan Koch, president and MD of GMSA and African operations, has confirmed that GM will continue to manufacture in South Africa, with three product programmes in the pipeline.
  • The company has invested its own cash resources in the R150m vehicle conversion and R250m parts distribution centre, despite the depressed vehicle market.
  • GMSA has taken "tough decisions" to restructuring the business, including laying off almost half its workforce from about 4000 to 1800 two years ago, resulting in a 27% improvement in productivity.

Statistics:

  • Over 4000 employees were working at GMSA two years ago, but this number has been reduced to approximately 1800.
  • GMSA's workforce reduction resulted in a 27% improvement in productivity.
  • GMSA has invested R150m in the vehicle conversion centre and R250m in the parts distribution centre.
  • GM's local assembly plant in South Africa remains committed to operation, with three product programmes in the pipeline.

Sources:

  • Business Day/All Africa Global Media via COMTEX, " GM warns of high costs in South Africa", Sep 21, 2009.