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Editor's note: Although Dr. Piszczalski's normal travels are domestic and related to IT, he recently spent some time in Thailand and took the opportunity to check out an assembly plant. Consequently, those of you looking for something about IT should check out Larry Gould's article on Covisint in this issue.
What do you call a vehicle made in Thailand with Japanese steel, stamped on Japanese presses, built basically on the Toyota Production System, and even sold in Japan? You call it a Chevrolet Zafira. The maker is no other than General Motors. GM's Rayong, Thailand, assembly plant is about as global and diversified as it gets. It exports 90% of its products to 19 countries. It will soon make vehicles developed and originally produced by Italian, German and Japanese makers. That plant, furthermore, will be producing a sedan, a minivan, and a pickup truck, all under the same roof.
Such flexibility is essential in one of the toughest markets to make a dime. Thailand has no less than 15 vehicle and five motorcycle manufacturers. The country has tripled the manufacturing capacity it needs to support current, domestic sales. Indeed, just one GM Lordstown-size plant could satisfy the domestic needs of the entire country. Initially, GM planned for its $650-million Rayong plant to serve more than Thailand. Little did it realize, however, that the whole Southeast Asian region would tumble. Today it exports much farther than originally anticipated. Most of its Thai-built vehicles today go to Europe under the Opel nameplate. Some vehicles are shipped as far as Chile. And the Rayong plant may have the distinction of operating the world's longest supply chain. Most of its engines and transmissions come one-third of the way around the world, from Europe. The lead time is 10 weeks, placing an extreme importance on getting accurate dealer forecasts.
No matter how you cut it, Thailand itself is different. Thai buyers are not necessarily in a rush to take possession of their vehicles quickly. They'd rather hold up delivery until their "lucky day," as determined by their neighborhood astrologer.
The young GM plant has already distinguished itself by a remarkable achievement in quality. It is the first Thai plant to sell finished, passenger vehicles to Japan. To do so, GM had to bring in its best quality practices and overcome Thailand's image in Japan, which was mainly as a backwater country better known for its golf courses and sex tours than for manufacturing excellence. The GM plant's safety record is also enviable. It boasts 14 million work hours without a serious injury. Opened in May, 2000, the plant produced 51,000 mini, multi-purpose vehicles (MPVs) last year, all Zafiras.
The Thai plant was constructed to match the plant layout and processes first set in GM's three other new, overseas plants, namely in Argentina, Poland, and Shanghai. Indeed, the head of the Thai plant, Tom Wilson, transferred there after helping launch the GM Shanghai plant. All four plants produce much different product. They also use much different manufacturing equipment. However, they all share the same basic "T" shaped plant layout and GM's Global Manufacturing System. GMS is GM's version of the lean, Toyota Production System. The Thai plant also enjoys unusual flexibility. Because it lacks the hard automation of a transfer line, the plant floor can be reconfigured over a weekend. Also aiding flexibility is that over 70% of the vehicle welds are done manually. The plant is more than a so-called "knockdown" plant. It stamps all the vehicle's large panels, for instance. Its employees make about $130/month, about the same wages as GM's China plant. They are non-union. GM had the luxury of combing through 10,000 applicants to pick the 1,000 that would actually get job offers. While its payroll costs are low, the Thai workforce is not as well educated as other GMers. This is especially true within its engineering and white-collar ranks.
Achieving sales success close to home in Thailand is a tough nut to crack, acknowledged William Botwick, President of GM Thailand and Managing Director for all of GM's Southeast Asia operations. Prior to the economic collapse of 1997, the area was arguably the fastest growing market in the world. Instead of maintaining a blistering upward trajectory, Thailand's domestic market tanked. In terms of unit sales it is still down 46% from 1996. Japanese makers are well entrenched in Thailand, especially for entry-level buyers. That group is by far the largest category of buyers. For instance, Honda dominates the 900,000 units/year motorcycle market. Pickup trucks account for 55% of the vehicle market. Many sell for less than $9,000. With no profits and poor volume, Daihatsu, for instance, shut down its Thailand manufacturing operations and fled the country altogether. Surprisingly, Japanese luxury brands such as the Lexus and Acura are not strong sellers in Thailand. The Thai luxury segment instead is dominated by Mercedes and BMW. GM is optimistic that its Zafira can capture the non-sedan, luxury segment not served by its rivals.
Despite its current economic malaise, Thailand is the place to be. Once the region breaks out of its current doldrums, Thailand could double or triple auto production. This is due in part to the huge ASEAN Free-Trade Area (Afta). The region overall remains one of the best and biggest, untapped markets on the planet. Until things change, most of the world's big vehicle makers simply hope to keep losses to a minimum. They're keeping capacity poised for a spectacular boom. Still, those golden times always seem to be just over the rainbow, like a Shangri-la, one-to-three years away.