GM is planning to increase purchasing from suppliers in Mercosur by US$500-600m a year over the next 18 months, according to AutoData.
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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.
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By GlobalDataSeparately 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.
