Case Analysis: Gm’s Plant X-Brazil

Topics: United States dollar, Investment, Exchange rate Pages: 2 (759 words) Published: April 13, 2008
Economic and political reform resulted for a great deal of growth a relative stability for the Brazilian economy. A large component of that economy and a substantial benefactor of that growth was the Brazilian car market. With a rise in production in 1996 over the previous year of 6% to 1.7 million cars Brazil was now the seventh largest car market in the world. Brazilian authorities predict the market will nearly double by 2000 and in doing so become the fifth largest car market. For this rapid growth to become a reality a massive amount of capital investment the majority foreign to meet the production forecasts. Local governments in brazil are competing with one another to entice various car manufacturers to set up shop in their region. To do this loans with lower than market rates and other various discounts. The booming market and governmental incentives have lead to foreign manufacturers investing over $10 billion over the next few years.

As of 1995 the Brazil produced 1.6 million vehicles and the manufacturer which had the greatest share was Volkswagen with 700,000 produced. Looking to claim a portion of Brazil’s rapid car market GM is investing planning on building a $600 million plant which will focus on the production of the “popular car” which is a variety defined by efficiency and low cost. The Blue Macaw is the model name of the automobile which this plan is focused around. Not only is GM delving in to new markets, but it is also planning to test out new production methods. The new production strategy is called Co-Production which contracts the vast majority of the production save for the design and engineering portion. The strategy consists of organizing suppliers to build and provide the capital for their given component to be manufactured. There are two tiers of suppliers the first both manufacture and assemble on-site while the second only produce. GM estimates 30% to 35% savings in manufacturing costs by implementing this...
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