GM Open to Obama’s Manufacturing Call

WASHINGTON – General Motors is positioned to repatriate work previously sent overseas while also compelling suppliers to locate in the U.S., a top executive says following President Obama’s call for manufacturing renewal.

“We can do all kinds of things in the plants we’ve got with our products,” Mark Reuss, president of General Motors North America, tells WardsAuto after addressing the Washington Auto Show here.

“There’s a lot of shift upside and operational upside within our plants already in existence,” he says, adding GM’s manufacturing sites also are highly flexible.

GM’s Orion Twp. assembly plant, for example, builds two small cars, the Chevy Sonic and Buick Verano, on the same production line although the vehicles use different architectures. The auto maker also has greater flexibility with the new United Auto Workers union contract to better match manpower with output, which it says ultimately leads to more jobs.

In his State of the Union address this week, Obama said U.S. manufacturers should be given incentives to enable the repatriation of work outsourced because of cheaper overseas production costs. He also wants incentives for new domestic manufacturing projects.

Obama proposes an end to the tax deduction available for shipping work overseas and hopes to double the breaks available to manufacturers investing in new U.S.-based technology production. He also wants the federal government to help finance new manufacturing projects in communities hit hardest by the outsourcing binge of the 1990s and 2000s.

Domestic production already accounts for most of the cars GM sells in the U.S. But Reuss says the auto maker will locate some production of its popular Chevrolet Equinox cross/utility vehicle at the idled Spring Hill, TN, plant later this year. GM builds the Equinox in Canada.

Spring Hill also would be a candidate for overflow production of other models, GM has said.

Among the new GM vehicles headed for the U.S. market are the Spark small car, coming this year, and the Buick Encore small CUV due in 2013. Both will be assembled overseas and Reuss expects GM to stick with that plan, though U.S. production is plausible in the future.

“(We’ll) look at it after launching it,” he says.

Reuss says GM could compel suppliers to set up operations close to the auto maker’s U.S. assembly plants by moving away from a purchasing strategy based on piece cost to one more focused on landed cost – the combined total of piece price and delivery charges.

He says GM’s financial crisis forced it to source the cheapest part instead of one priced to include the cost of delivery. Demand landed cost from suppliers, he suggests, and the global supplier of a component will find it more efficient to add an operation near a GM plant.

GM’s electric-vehicle battery supplier, LG Chem, provides a good example, Reuss says. The Korean company soon will provide batteries for the Detroit-built Chevy Volt from a new facility in Holland, MI.

However, it would take time for GM to implement a landed-cost purchasing strategy. “We have a lot of legacy,” he says. “We’re not close to perfect in terms of optimization of the supply chain at the plants. Not efficient. There is a lot of margin to be had there.”

With the signing of last year’s labor agreement with the UAW, GM brought back an estimated $2.5 billion of future-product investment originally planned for Mexico, including the work planned for Spring Hill. The investment will result in 6,400 UAW jobs retained or created.

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