Quick decisions, adaptable product spell success General Motors Corp. has a surprise hit in its Zafira microvan, first introduced into the European market in April 1999.
In Europe, where the Zafira carries an Adam Opel badge, GM can't up its sales projections fast enough. Now, the No.1 automaker hopes the 7-seat monocab vehicle will enjoy similar success in other global markets, where the Zafira will be badged as a Vauxhall, Holden or Chevrolet.
When GM couldn't squeeze enough units out of its plant in Bochum, Germany, to meet Zafira demand, it turned to Thailand - where its subsidiary had been weathering some bad luck. GM Thailand had broken ground on its manufacturing plant in Rayong province, located on the country's eastern seaboard, in November 1996. A mere seven months later the Thailand baht devalued, kicking off an economic crash that soon brought the Asia/Pacific region to its financial knees.
GM not only had to delay construction on its Thai plant but also downscale its size and switch product. Originally, it had planned to build the Opel Astra there for Southeast Asia and Japan - markets that quickly evaporated. The economic crisis demanded that the company be flexible.
The Asian meltdown also triggered a change in GM's overall Asia strategy. GM today is basing future product there primarily on its alliance with Suzuki Motors Corp., of which it holds a 10% stake. The YGM-1, a small, Suzuki-based car slated for production in 2001, now is being upheld as the paragon of GM's new approach to Asia.
"That was a tough call for a while," says GM Chairman John F. Smith Jr. of the May 1998 decision to shift from the Astra to the Zafira at the Rayong plant. A tough call, but one Mr. Smith says turned out to be a "home run."
When the plant started production in May, it already was a year-and-a-half behind schedule. GM finally is beginning to breathe a little easier, however, with an upwardly revised production target of 50% for 2001, from 40,000 to 60,000 units. More than 90% of production is destined for export, and at least three-quarters of the Zafiras will help feed Europe's insatiable appetite for the vehicle.
Mr. Smith made the announcement at the Rayong plant's grand opening in early August, an inauguration attended by about 1,550 people and led by Thailand's favorite princess, Her Royal Highness Maha Chakkri Sirindhorn.
The production increase will be accompanied by $14 million additional incremental investment, as well as the addition of 200 to 300 jobs, representing a second shift, in next year's first quarter. GM Thailand President William S. Botwick says he'll meet the output target by working two shifts plus overtime, adding that he hopes to turn out more than 60,000 units next year.
GM says the reason the Zafira is so popular in Europe and South America, and why it is destined to find success in Asia, is its configuration flexibility. The seven seats can be shifted, moved or folded into the floor so the microvan can cart everything from an extended family to a load of cargo.
Flexibility, say GM product planners, also is the highlight of the Rayong plant. "The facility has the capacity to respond to the market fairly quickly," says Rudolph A. Schlais, president of General Motors Asia/Pacific.
Built on GM's midsize plant template that also served as a base for plants in Eisenach, Germany; Gliwice, Poland; and Shanghai, China, the assembly plant is T-shaped, which allows for more docking areas around the general assembly lines so that components can be delivered to the line near the area they are utilized.
GM Thailand officials are quick to note there's nothing particularly unique about the plant. In fact, the only feature that differentiates it from its global counterparts is that it is less technologically advanced. The 1.1 million sq. ft. (102,190 sq. m) facility - far more space than currently is needed - employs 14 robots, used only when quality or safety dictate.
GM instead relies on a skilled but hard-to-retain domestic workforce - due to a tight labor market, which it offers a starting pay of 6,000 Thailand baht monthly, or about $150, for 42.5-hour work weeks.
But while the plant may not be different from the others, the country is. Thailand has opened its doors to the world's automakers, all of them concentrated in Rayong's industrial sector. The government has no local parts content quotas and gives preferential treatment to U.S. companies. While other foreign corporations must do business in Thailand through joint ventures, U.S. firms can operate wholly owned facilities, due to a century-old treaty between the U.S. and the former government of Siam.
Despite global demand, Zafira alone cannot help GM's Thai plant reach its production capacity of 130,000 units annually by the target date of 2004-'05. Officials say that goal only can be achieved by adding another product, if not two.
Possibilities include a smaller passenger car and a 1-ton pickup, an option that appears the most tempting. That's because pickups represent 55% of the Thai market due to a tax structure in which pickups and other commercial vehicles carry an excise tax of 5%, while cars are taxed at 45%.
Mr. Botwick concedes that in order to achieve a goal of a 10% domestic market share, the automaker should consider a pickup. He says GM plans to work with alliance partner and Thailand's market leader Isuzu Motors Ltd. on possible pickup truck development.
A second product - whether truck or subcompact - is slated for the plant in 2001. As GM already has learned, in Thailand, it's sometimes good to wait before making those kinds of decisions.
