BRAZIL: GM aiming to increase Mercosur purchasing - report
GM is planning to increase purchasing from suppliers in Mercosur by US$500-600m a year over the next 18 months, according to AutoData.
GM sourced around US$4bn from the south American trade block in 2005. 90% of this was from Brazilian companies.
In particular GM is targeting Argentine suppliers to GM's Rosario plant in the country. Local content was around 45% but GM is aiming to bring this up to 70%, by increasing local purchasing from US$130m to US$210m a year.
According to AutoData, GM executives are working on a long-term exchange rate of R$2.70 per US$1.00. At this level many local items are not competitive, and purchasing executives are looking for a sustainable ratio of imports to local content.
The newsletter quoted the example of tyres imported from China for the Chevrolet Celta. Around 40% of tyres are imported, while the remaining 60% are supplied locally. GM is also encouraging suppliers to import more to keep their own costs down, and avoid GM having to import more.
Separately AutoData reported that the Brazilian components industry trade association, Sindipeças, has estimated that it turned over around US$24.2bn in 2005, equivalent to 5% of GDP.