GM Supply Chain Moves, Intrigues & Puzzles

Here's a rare thing: A car company invests in the United Kingdom instead of Germany as a place to build out its supply chain and future car lines.

A few weeks ago, General Motors said it will allocate production of its next-generation Astra compact car model to its manufacturing plants in Ellesmere Port, UK and Gliwice, Poland, as part of its plan to revitalize operations in Europe.

GM, which sells under the Vauxhall brand in Britain, is expected to spend about $1.54 billion (£1 billion) in the UK supply chain, according to a report from MSNBC.

The company said the decision to invest more heavily in Ellesmere Port stemmed from new labor agreements recently approved by the plant's workforce. GM also noted:

[The plant] will implement several operating solutions to improve flexibility and reduce fixed costs and hence significantly improve its cost competitiveness. This will make Ellesmere Port plant one of the most competitive plants in the Opel/Vauxhall manufacturing network.

GM added in the above-referenced press statement that in Poland, the Gliwice plant:

...has built outstanding quality at very competitive cost levels for Opel/Vauxhall. The plant has embraced a spirit of continuous improvements and its flexibility and cost competitiveness paved the way for Opel/Vauxhall to assign production of the next-generation Astra to Gliwice.

Assembly of the new Astra model is expected to begin in 2015, and both plants are expected to run profitably at full capacity utilization, GM said. The carmaker will pump in $376 million (€300 million) to upgrade the plants and manufacturing lines.

MSNBC speculates that GM's plans for the UK facility could halt production of the Astra, its most important model, at the main plant in Rüsselsheim, Germany. Such a step would mark a significant milestone for all European car companies, which have been forced to consolidate the last several years because of dropping demand and profits.

Company officials, at least formally, said in a statement that Opel/Vauxhall's home plant in Rüsselsheim plays a key role in the forward-looking strategy. Opel/Vauxhall's CEO Karl-Friedrich Stracke said:

It is our most modern factory, has an outstanding workforce and produces exceptional quality. I want to run this plant on full capacity. But Rüsselsheim also has to remain competitive, and so we have to increase flexibility and significantly reduce our costs per vehicle.

In another unusual move, GM also recently announced plans to expand its global design center in Incheon, Korea, doubling the size of the facility to include new modeling studios, display spaces, and areas for creative work. Aren't auto-design centers typically based in Japan?

The company added that by 2013, the enhanced design center, which will house 200 employees, will:

...support the organization’s expertise in exterior and interior vehicle styling, digital design and studio engineering, which have resulted in the successful Chevrolet Spark, Aveo and Cruze models... and the center will maintain its focus on visualization technologies and advanced design.

It's unclear to me what the trickle-down impact will be to supply-chain partners -- in a global supply chain does it matter if you ship to Bulgaria or Poland or Germany or England? In the bigger scheme of things, perhaps GM's announcements send a broader signal. Maybe now's a good time for OEMs to consider other geographical regions. With everyone watching the bottom line, maybe some deals are out there for the picking.