As foreign carmakers are required to create partnerships, joint ventures (JVs) are among the largest Chinese companies and multinationals and, according to the China Association of Automobile Manufacturers (CAAM), foreign companies manufacturing in China through JVs made up 45% of total automobile sales in 2011, up from 40% in 2010.
GM has 12 ventures and two wholly-owned foreign enterprises with more than 55,000 employees in China. GM, along with its joint ventures, offers a broad lineup of vehicles and brands, with products sold under the nameplates of Buick, Cadillac, Chevrolet, Opel, Baojun (the Baojun 630 saloon is pictured above), Wuling and Jiefang. In 2012, domestic sales of vehicles by GM and its joint ventures jumped 11.3% on an annual basis to 2,836,128 units. The company’s head of manufacturing for the region has recently changed, with China veteran John R. Buttermore being recalled to Detroit to head up the Global Manufacturing Truck Launch operation; his replacement in Shanghai is James DeLuca, who will continue the expansion programme driven by Buttermore.
AMS travelled to Shanghai-Volkswagen’s (SVW) latest plant, at Yizheng, 300km from Shanghai and talked to Harry Schneider, senior director and vice car plant leader. Schneider’s work involves journeying from one start-up plant to the next, smoothing out production glitches.
VW has so much experience in China that it now operates a ‘kit plant’ system, where a standard facility design is laid down on a greenfield site, with ‘blueprint’ layouts for all services and equipment. Schneider says: “In the east of the country this system works well and plants can be built and ‘switched on’ very quickly but my next job may be to help with the start-up of a full production facility in Urumqi, [in Xinjiang Province in the far West of China], this will be quite a challenge as there is not much infrastructure there yet.”
SVW was thought to have been pushed quite hard by government to bring the plant and thus jobs to the area; start-up is scheduled for 2014 with an annual production of 50,000 units, probably of the basic Santana saloon. The factory’s first phase of construction will cost US$316 million.
One example of a highly successful JV is Dongfeng Nissan. Dongfeng has JVs with Honda, Nissan, Peugeot- Citroën, Kia and the Taiwanese Yulong Group, with saloons, hatchbacks and small SUVs made in Taiwan and China, and marketed under the Luxgen brand.
AMS visited Liu Yun, leader of manufacturing strategy planning and cost reduction at Dongfeng Nissan, to find out how much of this production system model was developed in China and how much of it follows the global Nissan Production System. “We have followed the Nissan Production System (NPS) and have developed our own Dongfeng Nissan system,” says Liu. “Some of our ideas have gone into the NPS. Indeed we are number one in Nissan globally in quality and cost reduction, judged by the Nissan standard monthly indicators. We have benchmarked with competitors within China but not further [abroad]. We see the manufacturing challenges in China as being very particular to the region so we do not, for example, benchmark directly against Toyota’s TPS in Japan.”
Liu adds that Dongfeng Nissan does not benchmark against Renault as often as with Nissan, but says that “in 2013, we want to increase this.”
For Chinese JV partners, the development of sub-brands enables them to capture the technology, in vehicle design, engineering and production systems, of their foreign partners, and harness it for vehicles often made exclusively for the home m arket. Asked if Dongfeng gains a lot in production ‘simplification’ and consequent cost saving on the Venucia lines, Liu replies: “We cannot regard these sub-brands as a cost-reduction activity and we are looking forward to having our own strong brand, within Dongfeng Nissan – this is our everlasting dream!”
Developing sub-brands also allows better overall production schedule balancing, allowing common lines to be kept fully employed during peaks and troughs of demand from Nissan buyers and buyers of the new brands. “We are using the same lines and same tooling for the Nissan brand vehicles, Quashqai and X-Trail for example, and the Venucia cars and this also means the same high quality for the cheaper sub-brand vehicles. The customer wins whether they buy a Nissan or a Venucia, ” says Liu.
Dongfeng Nissan is building mainly to order, but does make large runs of single model production to try and meet the booming demand in the region. “To a certain extent, the customers are so keen to buy a car that they will choose from dealer stock,” says Liu. “But in the second half of this year, we are facing ‘micro growth’ in the car market and so we are considering more build to order.”
Stamping at the plant uses a mix of Chinese Jier and Japanese and German press lines, with dies sourced locally and from Japan. All A-surface panels are pressed in-house but smaller structural pressings come from a local Japanese- Chinese JV supplier, Unipress.
Buying automation equipment from foreign suppliers is, of course, expensive and while China is a land of tremendous innovation in consumer products, it does seem to lag behind in the manufacture of tooling and equipment for vehicle makers. Dongfeng Nissan has responded to the paucity of Chinese-made equipment by making its own. Liu says: “We buy in motors, sensors and controllers, and build our own AGVs. This is partly to keep cost down but also so we can build in all the features we want.”
This innovation fits neatly into Liu’s overall cost reduction strategy. “We are working on all types of low-cost automation to counter the rapidly rising labour costs; AGVs make the factory safer as well as reducing some personnel numbers,” he says.
Dongfeng Nissan’s paintshop is an example of how the auto industry in China is focusing more on safety and environmental management. It moved to all-waterborne paints (except clearcoat) three years ago, partly driven by the need for greater efficiency but also, as Ling says, to satisfy legislation. “In 2012, the Guangzhou municipal government introduced very strict standards concerning water usage; we now have zero waste water discharge from anywhere in the plant,” he says. “We have also installed solar panels but at present they are used only for lighting the maintenance building.”
Guangzhou Automobile Group has JVs with Fiat, Hino, Honda, Mitsubishi and Toyota and has learnt much from its partners, not just in vehicle technology but in manufacturing systems too. Ling Shiquan, vice-chief of the technical centre at GAC and formerly a manager at GAC-Honda, says: “We very much used the Honda Manufacturing System [at GAC-Honda] and this and the TPS (learnt from the JV with Toyota) has been brought into the main GAC strategy. We mainly used the TPS for our management and the Honda system for the production technology.”
While some of the JVs are staying with their foreign partners’ traditional machinery suppliers, many are requesting quotations from other companies. Tan Xi, vicechief of the GAC technical centre, in charge of process planning, tells us: “In the second GAC-Honda plant, we have used Dürr and we are very happy with their equipment; in the first paintshops there, when we had 120,000 units per year, we used Taikisha but when we went to 240,000, we switched to Dürr.”
Indeed, the Dürr installation is a first for Honda anywhere in the world; they have been very faithful to Taikisha in the past.