Supplier Technology Adds Fourth Leg to GM's Stool

Harold R. Kutner, 57, has headed General Motors Corp.'s giant worldwide purchasing organization since July 1994. He was interviewed in May at his office in Warren, MI, by Senior Editor Greg Gardner and Associate Editor Tom Murphy.

Q - You've added technology to your three-legged stool of quality, service and price that determines which suppliers get which contracts. Do you think they are hiding their best stuff from you?

A - No, as a matter of fact if you look at the technology we are putting in vehicles it is equal to or better than what our competitors are doing. What is happening today, demonstrated by what is coming forward, is driven by either product or process technology.

I think the supply base, by becoming global and more competitive, is kind of saying that they are equal on the cost and quality issues. For those who are going to succeed, technology is the major differentiator in the next millenium. Technology is what brings forward customer enthusiasm, items we can barely think about today, like new powertrains, like different braking systems or collision-avoidance systems.

Where we measured suppliers relative to their quality and service, we think it's time to measure them by the kinds of technology they bring forward.

Q - It was recently reported that you have invited more than 40 steelmakers to bid to supply you on a global basis. Will one steel supplier sell you all of the $5 billion of steel GM buys each year?

A - We don't really have the results yet. The process is under way. We are encouraging several of the steel suppliers, like Beth-lehem, to become more of a global player. Through our two engineering organizations, we have come together with common specifications for steel. We produce 8.4 million cars per year, and for the first time we will have common specifications for steel. It provides a great opportunity for suppliers that historically have been limited to domestic production to engineer their product once for us and supply us in many places around the world. We expect significant results.

Q - Does this mean you're going to offer longer-term contracts?

A - Basically, yes. We've done a couple of things relative to outsourcing steel in the last few years. We've been awarding steel contracts based on product programs.

Q - So, those who are selected for GMT800 truck programs cannot assume that they will have it for the life of the program?

A - No, they will have it for the life of that program. I think that will vary depending on the product programs. Some may be three years, some may be five and some may be less. There is commitment on everything we do. With our buying power we are supplying steel for suppliers around the world.

Q - Will you be buying more steel from outside the U.S.?

A - I don't know if that will happen or not because results aren't in. But I think probably in some continents around the world, for example in Latin America, without a doubt we will be buying more steel than we have historically.

Q - Is the goal to source all raw materials globally, and how close are you to doing it?

A - I wouldn't say all of the components but I would say a major number of the systems. Today we're sourcing multiple programs at one time. We're not only sourcing GMT800, we may be sourcing the (Opel) Vectra or another program in Europe at the same time. We're probably sourcing 70% of the major systems.

Q - Suppliers who praise the global purchasing system at the same time say they don't see any real sharing of cost savings from warranty reductions or other ideas that they generate.

A - Well, the warranty program is new. We implemented it in January. We've had outstanding responses. And we have taken some problems that we've had and eliminated them in a matter of months. We've also had programs in Latin America across all vehicle product lines, where we've seen this process work very quickly. And we've eliminated the problems and that's obviously customer enthusiasm. Our supplier council developed risk and reward. It's been bought into by our suppliers and when we set the target, based on fact and data, that this problem is a manufactured problem, we set a goal. They meet that target that we set together, and we pay them half the differential of what it was costing us for a period of time. Once you identify the problem and fix it, then you have to wait 90 days for those cars to turn around. So there will be many suppliers who are in this program who will be getting rewarded. There will also be some suppliers who are going to be penalized because they haven't made the process of changes. But I think your question is too early.

Q - Can you quantify savings you've realized so far?

A - I can tell you it's in the billions of dollars of warranty improvement. I may be willing to give you the name of a supplier that was one of our first cases that we saw a great success with. You may want to talk to them about it. It's one of the belt suppliers on the engine (Gates Rubber). Not only did we improve what this supplier was doing for us, at the same time he helped us improve other systems that tied into some of the warranty issues. The problem with warranty is to try to isolate where the problem really is. When you think about warranties, you have to think about it as not a financial program, even though the by-product will be financial. It's a customer program. Suppliers are causing quality problems in vehicles and so are we in the way we assemble products. We're working on what we are doing ourselves and the way we sell, but we've got to eliminate the customer being dissatisfied, and we're all a part of this game. Because we're global, we can see what's happening around the world. Eighty-five percent of those suppliers are hitting almost zero defective parts per million (ppm), so we know it's possible.

Q - What's the average defective PPM rate for GM suppliers, and how does it compare to a year or two ago?

A - I can't give you any numbers, and I think you will find out it's different based on the complexity of the vehicle. For example, at Saturn there's less complexity because there are less options than we have in a sedan DeVille. So, some of the PPM performance is driven by complexity, but we see about 40% to 80% reduction in the last three years. It's an industry measure, and the whole world uses it. I'd say we've seen a 40% or 60% drop in PPM from the supply base over about a three-year time. That's why we're moving to technology, because the field is getting really level with really competitive numbers. The next differentiators are those who know the technology.

Q - Last year you mentioned that ABS systems you once paid $1,000 for you are now buying for $100. What are some other examples of systems that have come down drastically?

A - If you look at catalytic converters, for example, I think technology is driven by different loadings of the precious metals like platinum, palladium, I think we see major reductions in them. I think entertainment systems with CD players where technology has made them smaller, today you're going to see multiple disc loading in the vehicle with higher technology and significantly lower cost.

Q - Why is it that the price you pay for ABS comes down, yet the consumer is still paying at least $400 or $500? We've seen some stickers out there where ABS is still up to $1,000.

A - I think you're out of my league with the price on the vehicles. It's different on every car due to the applications that you have. On many of our cars they have been a standard feature for years and years.

Q - You do more purchasing of materials for suppliers?

A - I don't know what the percentages are for Chrysler, Toyota or Honda, but we very aggressively try to help our supplier's cost structure and if we can use our size to do that with our purchasing power, then we will. Our philosophy is: If we can get into the value-added chain from the ground to the vehicle, then we want to be part of that process. Just like we want to be part of the materials process. We want to get into modules and systems because of our knowledge, and because of our people in Taiwan, or Singapore or someplace else, every week we know more about what's happening with base rubber. Maybe we can participate in that value chain, take the middle man out, supply something more to our suppliers and help the cost structure.

Q - Are you taking any special steps in preparation for a resurgence of inflation?

A - We're sourcing today for programs three and four years from now. Basically we're fixing prices today for those systems, and I can tell you that they are all lower than they are today. And in some cases suppliers can go out and hedge their costs for some base materials.

Q - Most of your suppliers are making a profit, but we've noticed that some of the biggest players like ITT, Cooper Industries and AlliedSignal have decided that they can get better returns in other industries. Are these guys all inefficient dinosaurs?

A - ITT is a very successful company and if it gets better returns from some other business and if they feel that way they should get out, because its gonna get tougher. Does that mean that the supply base is shrinking? It could be. I think there is a big breadbasket market here in the automobile industry for people who want to get into it.

Q - Back to warranties, last year you didn't think you had a systematic policy to deal with the warranty issue. Do you have it now?

A - Yes. There's really two processes. With existing vehicles in the field, we get warranty data that is showing problems for customers and we're identifying some of those major items. We're calling the supplier in and looking at the parts of components or systems that come back regularly to the dealer. We take them to a parts return center. At that center our engineers and suppliers disassemble those components or systems, and together we try to identify what is causing the problem. We identify the cause, which may be our responsibility. If we findthat there is a manufacturing problem or a design-related problem that the supplier is responsible for, then together we'll set a target for reducing warranty claims from that issue over six months. Then six months from that date we start measuring again in the field and see if our level balances out with his level. If the supplier's level is lower than that, we start rewarding him for the difference. If he's not lower, then we expect for him to fix his problem.

The second part of the process is for future car programs. Let's say we're going to do a new truck program for the year 2000. We'll ask the various suppliers to tell us what their IPT (warranty incidents per thousand vehicles) is or what they think they can do. And then how will it improve in the year 2, 3, 4, 5 for the life of the program? Various suppliers now hopefully will give us their price, their technology, and their warranty cost forecast. We place that contract and now the supplier is responsible for meeting that target.

Q - Give me some examples of specific programs that you've found a way to use volume to drive down costs?

A - We know everything we're going to buy for the next 18 months and our commodity people look at this and say, well the timing is right, I can combine this one with that one. Timing is a key factor in our ability to hold it together. The bottom line is that where we used to source 200,000 units, our average sourcing package is in the 800,000s today.

Q - What's your overall purchasing budget for '98?

A - It's about $70 billion. I think if you look around the world and see what is going on relative to emissions and safety, what we're putting in our vehicles, contentwise, is greater. Take all that added content out and I think you'll see our actual material budget is significantly reduced.

Q - What is the state of the year-2000 requirements conversion among your supply base?

A - We have physically audited suppliers around the world regarding the year-2000 and we found that we've gone into very simple locations and when you change the date to '00 versus 1999 security gates don't open, robots don't work. We've been very aggressively addressing the problem with our suppliers relative to questionnaires, not for our basis, but for theirs. Then, independent of that, we're sending teams out to suppliers, based on those questionnaires that our analysis says maybe they don't have a good plan. This is going to cause major issues. I say, woe be it to suppliers after all the communications that were sent, if they are not aware. I think the awareness level every day is getting higher. But it's going to be a big challenge.

Q - The economic collapse in Asia has been negative for most manufacturers. How has it affected GM?

A - Two things are driving us. The competitive marketplace is driving our need for significant cash flow. But this company is maintaining its market share, and there is a cost for doing that. So when you think about the loss of volume in Asia-Pacific due to the economic crisis, it raises the question: When you have an event that is negatively affecting you, do you need to turn it around and make something positive out of it? When we look at a (Indonesian) rupiah which has gone from 2,500 to the dollar, to 12,500 to the dollar, it provides opportunities not only for us, but also for our Tier 1 suppliers.

We've asked all our people in that part of the world to see if there are opportunities for us as well as our suppliers to export from Asia back to other markets. These types of situations don't happen every day. So, we see this as a major opportunity for us as well as our suppliers to combine three things: excess capacity; base metal reductions; and currency. We have teams to try to take advantage of supporting our supply base and educating them of the opportunities. I would identify this as maybe a windfall for our suppliers and us. Our process is trying to make our supply base aware of this and, of course, when they do, we want to share in the savings.

Q - So you want to take that catastrophe and export the lower-cost production and ship it back to Europe and North America?

A - Exactly. Obviously, we're not talking about going out and buying an engine from Asia. But when you think about some of the simpler types of products that we buy, there are opportunities to buy them there. Even in the equipment and machinery business, look at all the engines and motors all with copper wiring. The question we have is, are you Mr. Motor Supplier taking advantage of 80-cent copper versus $1.16, and if you're not, why aren't you?

Q - The Big Three and the White House say that they are committed to directing more business to minority suppliers.

A - What it's doing is really helping suppliers grow past the point of being small suppliers. Today, to be certified by the Michigan Minority Business Council or the National Minority Supplier Business Council there are certain requirements to ownership, for example, 51% ownership has to be minority-owned and the business has to be less than $100 million. Those are companies all of us in the auto industry are trying to attract business to. And this new program is saying, yes, you can take somebody who has $80 million and go out and sell stock and get equity so that they reach $300 million and still be considered a minority supplier, due to the stock situation. They might not be a 51% owner. So it's really providing opportunities for minority suppliers to pick up large contracts through equity. And we're all in favor of that.

Q - Is your goal to make 5% of purchases from minority suppliers by 2000?

A - Our goal is 10%. We're probably less than 5% now. We're moving up very aggressively. We're about $1.8 billion or close to $2 billion today. We drive real hard quality goals for the minority supply base. Which means that we don't want somebody who is identified as a minority supplier with five minorities out of 50. We really look into it in detail. Is this truly a minority company? When you go into the facilities that we are very active with, you see a very heavy concentration of minorities and we don't just want an owner with a white company to say well, we're doing business with minorities. We've committed over $1 billion to this program. It's not a social program; it's a program that we do naturally.

Chrysler's Sidlik Philosophical About Supplier Consolidation

Thomas W. Sidlik, 48, a former Chrysler Corp. quality vice president and later Chrysler Financial chairman and small-car general manager, was named executive vice president for procurement and supply last January. He was interviewed during June in his office at Chrysler's Auburn Hills, MI, headquarters by Senior Editor Greg Gardner and Associate Editor Tom Murphy. Mr. Sidlik was prohibited from discussing the pending Chrysler-Daimler Benz AG merger, but his views - from a newcomer to the purchasing arena - range from the impact of supplier consolidation and spinoffs to global sourcing.

Q - How large is Chrysler's purchasing budget for 1998 and how does it compare with 1997?

A - I've got $40 billion dollars in the bank, and that's holding steady.

Q - Last year the topic among the industry purchasing executives was the drive to hold suppliers accountable for warranty costs.

A - Overall, our warranty costs are going down, so that's a good sign. You saw the J.D. Power results on how high quality our vehicles are with the LHs and so on.

Q - But how much are they going down? We're trying to find out if this warranty accountability push has made any difference.

A - I've been on the job for six months, and I don't see it as a big issue. That's not the overriding thing that I've been working on; it's the partnership, it's working together on extended enterprise. I think trying to find fault with one organization or the other is not the right tactic. I have yet to have one supplier talk to me about warranty costs. It's been relationships, it's been commodity strategy, sourcing strategy, things along those lines. We're trying to do this for the customer rather than which bin the money goes into.

Q - In the last six to eight months we've seen some of the largest Tier 1 suppliers in the industry saying we're not getting the return we needed to justify staying in the automotive business. What do you make of all that?

A - They're selling to somebody, and someone is going to see the advantages of going into the auto industry and buying things that they have a competitive return. Those are the dynamics going on in American business and in the economy. There are plenty of people out there with a lot of money who need to invest it somewhere and get a good return. A 10% return in one business may not be adequate, but 6%in another business might be. We had return on sales of 6.5% last quarter. That's pretty good for an industrial, capital-intensive company where you have to spend capital years before the product comes out. So it depends on what your benchmark is. These companies, I would venture to guess, will be sold to companies that want to make this an ongoing business. You don't see anybody closing down shop. You don't see the major suppliers of the auto industry saying, "I'm out, closing the doors, never coming back." Someone needs the business.

Q - But you will have shifts in market share, for example, in the case of ITT's automotive business.

A - Depending on who they sell it to, that could shift the market share. They are really an exceptional company and we can't influence it very much. It's our contract. They can't sell our contract. Anybody can sell their business. You can certainly sell the facilities and the plant and transfer the people, but you can't sell the contract.

Q - Chrysler relies on suppliers for 65% to 70% of its components. What will that percentage to be in 5 or 10 years?

A - It's going to be about the same. I don't see any dramatic shifts. You may have some changes on parts. We just go at it, what makes sense component by component.

Q - How far is Chrysler willing to go in turning over development of an entire vehicle to a supplier?

A - It depends on the situation and the location. We're a global company getting more global. In business, there isn't one right answer to everything.

Q - You're also responsible for small cars. Would you consider turning over a small-car program to a Tier 1?

A - It would depend. It has never been proposed. We'd have to have the details I guess.

Q - SCORE saved Chrysler $1.2 billion last year?

A - Closer to $1.3 billion. We're already over $1.5 probably $1.6 this year and we're shooting for $2 billion.

Q - Can you identify where huge savings were achieved?

A - Really all over the chart. Don't forget that we share the savings with our suppliers. It's how they become profitable. It's how they make money for their shareholders. They come up with a cost reduction and they get to keep half of it. So it's a win-win for everybody. (Chrysler Corp. President) Tom (Stallkamp) invented this from nothing almost, and in 10 years we've got $10 billion. If anything there are more ideas out there than we can process. We don't have people forcing the vendors to come in. They're in here saying process my SCORE pages.

Q - Will it reach a point where savings are tapped out?

A - It's impossible with continuous improvement to get perfection. You never get to the goal line. It keeps moving. You just can't think of the new ideas that people will come up with. And the suppliers and the OEMs are constantly working together and feeding off of each other. That's what makes the system work. We're trying to make it work better than anybody else. You have seen what has happened in the past year on pricing, and you've seen what's happening in the country on pricing? There is no inflation.

Q - To some degree that has reflected flat or lower commodity prices. Can that go on forever?

A - That means that efficiencies have been going up. It's part of the global economy. If things get out of whack with a commodity, a processor or a product in one country with tariff barriers getting knocked down more than they were, you can import, export parts very quickly. And I'm not just talking about the auto industry, I'm talking about the world economy. Whether it's clothes, foodstuffs, machinery, hardware, autos, it's what is keeping the lid on pricing around the world.

Q - GM is pushing its Tier 1s who have capacity in Asia to think about exporting it back to Europe and North America. Are you doing anything like that?

A - The honest answer is that we sent two guys over there to see what was going on. The problem is that we're not nearly as big as they are, and they have the capability to do that. I wish I were in their spot.

Q - What's the next step in your supply-chain management strategy?

A - Tom (Stallkamp) supports great relationships at the highest levels of companies, and what we're trying to do throughout the whole range is fill it out so that you feel like a partner. I don't believe in beating people up. I just believe that relationships are pretty darn important.

Q - Is Chrysler pushing supplier mergers or acquisitions right now?

A - Last year there were some that we were interested in seeing. We talked about how Prince and JCI coming together made a whole lot of sense. I can honestly say that I haven't gone through all the supplier strategies and income statements and seen where things were, but if I did I'd be an investment banker with a nice suite on Wall Street, but no, I haven't personally done that. It's still a little too soon.

Q - Tom Stallkamp had a somewhat critical perspective on mergers and acquisitions.

A - There is so much money out there in the capital markets, and it's trying to find the highest return. People want to take it out from under their mattresses and do something with it. And they're seeing that there are plenty of good returns. That's why you're having so much activity lately.

Q - How do you maintain relationships that you think are so critical in the context of this rapid process of consolidation?

A - In general, the good managers win out because they are providing the most economic value to the shareholders. They are the guys who will succeed and be in the top ranks of management of any merged company.

Q - Do you expect a certain level of information in advance from the acquiring company?

A - We've gotten pretty good information. It is not really hitting us cold. Nothing that we're shocked about. That's not to say it won't happen, but most of our suppliers have good relationships with the Big Three. I think the other two guys will tell you the same thing.

Q - Are some of the large suppliers driving some OEMs to consolidate to improve their volumes?

A - I would come at it from a different point of view. Ten years ago I never heard of Hyundai or Kia, or for that matter, 20 years ago Suzuki only made motorcycles. So, there are a lot of new players on the market, too. While there may be combinations, there also seem to be some new companies starting up that will have their own supply base and their own infrastructure. They will provide opportunities for the customer and supply base. You could go against the common wisdom and say there hasn't been consolidation, there's actually been expansion as the world markets are exploding.

Q - Some suppliers question the notion that they need to go wherever an OEM builds an assembly plant. What's your attitude on that?

A - It makes some common sense, but to a certain extent some of our suppliers are already in a lot of the overseas markets before we are. Like Dana, with the truck plant in Brazil. Dana was already down there for the chassis.

Q - Is technology now just as important as price and quality in determining who gets future contracts or is it just another flavor of the month philosophy?

A - Those are matters we talk about when we make sourcing decisions. I can't give you specific examples, but I do know that we don't pick suppliers or change business just on one parameter. Certainly, technology is a piece of it. It's a balance, and it's part of the whole relationship. We want a well-balanced company that can provide us with parts efficiently. In 10 years I can't predict what my personal needs are going to be. Ten years ago I didn't even need a PC, now I can't live without it. One hundred years ago, people didn't think that they needed a car. If you take a look at the rapid pace of technology, it's just escalating.

Q - What is the trend as far as suppliers who are in financial trouble? Do you have to be more hands-on?

A - There haven't been many because the economy has been so strong.

Q - What if Chrysler were one division out of three or four and those other businesses were making 10% or 12% and all of a sudden they can't keep the momentum going and say they have to find a buyer. That's actually what's happening in some of these major Tier 1s.

A - It gets to the whole theory of investing and economic value. For the company that says, 'I can't make more than a 2% return,' there's some guy out there who says, 'Man I'd love to have a 2% return, I know how to make it 4%.' In my opinion, that's why diversification inside a company doesn't work, because the individual investor in the stock market can diversify his portfolio the way he sees fit.

Q - Will you bring in more suppliers owned by minorities with the recent federal change?

A - Well, our goal is to buy $2 billion worth from minority suppliers. And the great thing about getting Washington involved is that they set certain parameters that make it easier for small businesses, minority businesses to raise capital. So, it's actually a pretty good partnership for the government and private business to work together for a good social cause. It's something that everyone is behind. The Small Business Administration changed the qualifying rules to allow the minority principal to own as small a stake as 10%, as long as he is effectively in control. So, I'm optimistic.

Ford's Mazzorin: 'You've Got to Grow or Die'

Wielding a 1998 purchasing budget of $70 billion, Carlos E. Mazzorin, 56, Ford Motor Co.'s vice president of purchasing since January 1996, continues to scour the globe for better quality parts and billions in cost savings. Ward's Auto World Editor-in-Chief David C. Smith and Executive Editor Drew Winter interviewed him in mid-June at his office in Dearborn, MI.

Q - What's your view of this tremendous sell-off that's going on in the supplier industry?

A - I think a lot of things are driven by where the market is going. One is, you've got to grow or you die. I think a lot of the buyouts are another way to grow the business. The second is a response to a direction that many of the OEMs are going as they get into modularization and projects in different parts of the world. As you go more into emerging markets, you have to become more creative in the way you set up your manufacturing operations. And as you get creative, you see other opportunities.

Q - Some suppliers seem to be getting a little feisty, implying that they've got more power than they've had before and therefore they don't have to be totally subservient. Does that bother you?

A - I think that no one in this industry can say that they've been subservient to anybody. This is a trillion-dollar industry. There are very few monopolies. Instead, there is a mutual dependency between suppliers and the OEMs to satisfy the customer. The market is extremely competitive, and I think success will depend on how you manage the total value chain.

Q - Yet some companies do have a large market share and still aren't very profitable.

A - There are industries where the technology changes radically and rapidly. When that occurs, you are caught with old technologies replaced by new technologies that are more competitive in quality, cost and speed. Then you have an uphill battle and we all know about that.

Q - Suppliers still say you are hammering them on prices. What's your response?

A - We have put in place a number of ways to eliminate the waste from the value chain; it's not a concentration on the price. We are working together with engineering, manufacturing and purchasing. I am sure you've heard about our "total cost management" approach. It has been extremely successful and beneficial for both our suppliers and ourselves in terms of eliminating waste.

Q - Let's get back to the big players again, does that bother you at all that these people could get tough?

A - We all get tough in the market. The customer gets tough with all of us, and it's up to us working together to be able to maintain our market share and increase it. I haven't seen what I call extortionist tactics (where a supplier says) "You either pay this or we won't supply."

Q - How is your push for consolidating parts into modules going?

A - It's progressing well. We are not leading the pack but we're not in the back. We have defined our strategy of what we plan to do.

Q - Visteon (Ford's giant components making unit) is not a big player in seats right now. Would you like to see them get bigger?

A - In order to eventually optimize the interior of the car, the Lears, the JCIs, the Magnas indicate the need to do seats, IPs, door trim, headliners. So would Visteon like to grow in that area? Yes, they would like to grow in that area.

Q - How are your relationships with Visteon?

A - They have a sales office and they call on us like any other customer.

Q - They don't get any preferential treatment?

A - No. The only areas (where the relationship is different from other suppliers) concerns our commitments with the UAW.

Q - Does Visteon do its own purchasing?

A - Yes. Like a complete separate company.

Q - Where are you at this point with supplier warranties?

A - The point is not to have someone else pay for it, because that's the smallest part. The biggest part is that the customer doesn't come back. So the objective is how to reduce or eliminate the warranty o that you don't turn off the customer. Find the root cause. Not every supplier will be in the program because there are no more than maybe 10 to 12 systems that account for the majority, and those are the people that you want to have involved to reduce the warranty.

Q - How many do you have right now with you?

A - We have almost 15 suppliers, with their Tier 2s, because then the Tier 1 is going to take it to the Tier 2, and the Tier 3 and do the same. Now there's a complete infrastructure to be able to do this.

Q - What about the economies in Asia and other parts of the world. Are you buying more there because it's cheaper?

A - We are not running at the latest exchange: 'The Korean won went down so let's all rush and buy something in Korea and bring it here.' Then the next day there's something in England. You cannot run the business by running around the world like you're in a WalMart trying to buy parts.

Q - What's your feeling about Ford's managing relationships among the different supplier tiers?

A - In the value chain, you have to co-manage. We will get more sophisticated as the time goes by. We will not dictate to a supplier, but we will talk about how to utilize capacity.

Q - How would you characterize Ford's relations with its suppliers at the moment?

A - I think they are very good. As you know, I meet continually with the suppliers and no complaints.

Q - Some suppliers are talking about providing the entire interior of a vehicle. Do you have a limit as to how big the module will become?

A - We've talked with the suppliers of each module.Once agreed, then we start talking about what type of implementation we want to do. We are in different parts of the world and have a different speed in which we do certain things.

Q - Does the idea of a rolling chassis appeal to you as a module?

A - You read a little bit in the media about the Amazon project in Brazil. We are discussing that. That is being done today with several manufacturers, with some of the truck manufacturers.

Q - Is that something you are going to implement there?

A - We are actively looking at it. The industry is going to keep on changing. It's going to become faster, the concentration of power is in the consumer at the end of the day. He is the one deciding what he wants and doesn't want, what he wants to pay, how often does he want to change the product. He will keep putting pressure on the OEMs (and) the Tier 1, 2, 3 supply base. There will be a lot of pressure to continue to reinvent ourselves to be able to survive in the market.

Q - It's almost impossible to raise car prices nowadays. Does this make it easier to talk to suppliers about controlling costs?

A - It makes it easier to think out of the box. It makes it easier not to continue to sharpen the pencil a little bit every day, but to think about changing the pencil. We should have a new way to look at the business. We have to continue to experiment on the business model that OEMs and Tier 1s will have as we approach the 21st century.