During the last ten years, twelve industrial plants for the production of automobile vehicles have been built and are in operation in Brazil. This fact, linked to the structural changes in factories worldwide, has generated new behavior between the factories that assemble the cars and the car parts suppliers. Today the influence of the car assembly plants is greater and more decisive, especially over those companies with national capital, of smaller size and with less technological capacity. And this is happening even with the increase of new production processes, which give priority to outsourcing and to a greater integration between those who assemble the cars and those who supply the parts.
The main characteristic of these new production models is the reduction of the number of direct part suppliers. A fact which, in principle, could represent an increase in the bargaining power of the suppliers of auto parts. However, this is not happening. “It’s the carmakers that are leading the commercial relationships in this market”, says Alceu Gomes Alves Filho, a professor at the Production Engineering Department of the Federal University of São Carlos (UFSCar). He is the coordinator of an interdisciplinary study group whose objective was to analyze the organization of the production of the motor vehicle industry installed in the country.
The main points focused upon by the team were an understanding of how the relationships between the vehicle assembly plants and their parts suppliers had evolved and how these companies organize their production. This is exploratory work, but which is presenting some general concrete results, such as the influence of the assembly plants over the part suppliers, motivated by three factors picked up by the team. The first is related to a characteristic of the market. Auto part companies depend on the purchases of the carmakers. For example, in 1999 only 19% of the income of the sector of vehicle parts came from the part replacement market.
The second factor is related to an adjustment in the market. The opening up of the economy and the Automotive Regulations introduced during the 90’s in Brazil, made import parts by the automakers assembly plants possible. International purchasing in the sector jumped from US$ 708.2 millions in 1989 to US$ 3.64 billions in 1999 and a larger number of international parts suppliers came to Brazil going after their main clients. The third factor is related to the strategy itself of the carmakers, which to a large measure determines both the rhythm and the quality and technology of their parts suppliers.
In order to carry out their analysis, the UFSCar team studied all of the Brazilian market, but made use of physical proximity to follow at close range the relationship between the Volkswagen Motorcar Factory installed in 1996 in the town of São Carlos and ten of its parts suppliers. For example, it was observed that the influence of the assembly plant is related not only to prices but as well to technological development and to the productivity process. “Even the large parts suppliers, who theoretically relate themselves to the assembly plants on an equal footing, have their commercial strategies clearly tied to those of the assembly plants”, reports Alves Filho.
Modular Consortium and its Impacts in the Supply Chain of the VW-São Carlos Car Factory (nº 97/13071-9); Modality Thematic project; Coordinator Alceu Gomes Alves Filho – Production Engineering Department of UFSCar; Investment R$ 94,520.00