While vehicle production volumes are on an upward trajectory in South America, interiors remain relatively simple, says Francisco Maciel, regional vice-president for Faurecia Interior Systems
Joanne Perry (JP): How important is South America as a production location for Faurecia Interior Systems?
Francisco Maciel (FM): South America represents 6% of our turnover. I would say that is a small share in terms of the different regions but it is so important because today we have a global strategy and global platforms; in the end, we have to be where the automakers are. South America is the fourth or fifth market for cars in the world, so it is very important to be here.
JP: Which OEMs are you currently serving in the region?
FM: Here we work for the big four: GM, Ford, Volkswagen and Fiat. Plus: Citroen, Peugeot, Renault, Nissan and Honda.
JP: And here in São Bernardo do Campo you are very near to several OEMs, for example VW. Are you normally located in such close proximity?
FM: Yes. By our strategy we try to be as close as possible to our customers. But due to the characteristics of the market in South America – where we have a high diversity of models but low volumes – most of the time it is not possible to have a plant dedicated to one automaker. What we do is try to be strategically located close to most of the customers.
For example, here at this plant in São Bernardo do Campo, we are close to VW and GM, we are close to Ford São Caetano, we are relatively close to PSA [Porto Real] and we are not so far from Renault [Curitiba] as well, if it were the case [that Faurecia supplied the OEM from its São Bernardo do Campo site]. But strategically, this plant was built to supply VW, GM and Ford.
JP: What are the key challenges when supplying these OEMs, for example in terms of JIT delivery?
FM: I have some experience from other divisions [of Faurecia], other areas. In South America we have an issue – or, not an issue but a characteristic – where the demands of the customers change very frequently in terms of versions and quantities, so planning is not as stable as Europe or the US, for example. So it makes our life a little bit more difficult.
And on top of that we have some structural problems in South America – in Brazil specifically, and Argentina as well – where we don’t have many different routes to supply to our customers. If we have a problem where one route is blocked, we have no alternatives.
The cost of the transport is very high here – probably it is one of the most expensive in the world – and there are not many people with good knowledge of logistics. So companies have to undertake continuous training to develop their logistics teams.
In Brazil the OEMs are producing cars with high volumes and low complexity; simple, popular models – Francisco Maciel, Faurecia Interior Systems
JP: What do you believe the government could do to improve the situation?
FM: I think the infrastructure is the biggest issue. As we have no other way to transport our parts than trucks, we need the routes; we have just one route linking one city to another city in most cases. We really need the investment in infrastructure and in education, mainly in technical roles – these are very weak in Brazil.
FM: It could be an alternative.
JP: Looking at one specific government programme, how does Inovar-Auto affect your business in Brazil?
FM: Inovar-Auto is not a benefit that we as a tier one take advantage of directly; just the OEMs have these benefits up to now. There are some projects to make Inovar-Auto parts [in future] but today it is just for the OEMs. Nevertheless, the fact that it calls for high local content means that the OEMs are pushing us to localise many more parts. So in the end it benefits us with more volumes, more opportunities in terms of local production of parts.
One other point about Inovar that is important as well is the local development, which has been very much upgraded because the OEMs can benefit through tax credits. So it has given some incentives to have more local development as well.
JP: So does Faurecia Interior Systems source its materials locally?
FM: Our first choice is always local production, local suppliers. We just go abroad if the local production is not competitive in terms of cost – sometimes it happens – or we feel the technology is not well developed here yet. If it’s some specific technology that we don’t have a local supplier for, or if the supplier is not strong enough, we make the choice to have parts imported, normally today from Asia – China, India as well. We have some important suppliers in India.
JP: Are we talking about imports of parts or raw materials?
FM: Pre-built parts. We have very few raw materials imported.
JP: How different are the interior systems for Brazil compared with other markets?
FM: In Brazil the OEMs are producing cars with high volumes and low complexity; simple, popular models. In Argentina, they are producing cars with lower volumes and more complexity, for the medium segment. In Brazil today, the main cars that we have – for example GO, EcoSport, Cruze, just to name a few – are not luxury segment.
JP: That brings me on to my question about how much demand there is for luxury or customised interiors?
FM: Today what we see is that there is a trend toward more decoration. In a way it is a kind of luxury as well, but not the peak of luxury; not a Class-S, not a BMW. But the OEMs are working increasingly on interior decoration to make their cars more attractive to customers.
JP: What is demand like for sustainable interior products?
FM: Worldwide, we are starting to see some requests, but locally – not yet. Up to now what the OEMs are concerned about is light weight, which drives alternatives in terms of raw materials. Today at Interior Systems we have a patented technology using natural fibre [hemp] in combination with normal chemicals [polypropylene resin] to reduce the weight of the parts [by 25% compared with glass-reinforced polypropylene].
At 13,200 sq.m, São Bernardo do Campo is Faurecia’s largest Interior Systems plant in South America. Operating on three shifts and in accordance with the Kanban production system, it makes interior components such as instrument panels for: Volkswagen (the Gol and Polo); Ford (the Fiesta); Citroen (the Aircross and C3); Peugeot (the 208); and General Motors (the Agile, Cobalt and Cruze).
The facility houses equipment from a variety of international suppliers, for low-pressure injection moulding and gas-assisted moulding, plus operations such as laser welding, milling and (manual) painting. The 80 injection-moulding machines range in clamping force from 300 tons for small parts to 2,000 tons for the largest components. The moulds are changed up to 16 times a day to make parts for different models, with each transition taking around 15 minutes.
Predictably, volumes are especially high for the VW Gol, the best-selling vehicle in Brazil; for this model, 1,200 units are processed on the assembly line per day, around 64 per hour. However, Francisco Maciel, the plant’s vice-president, says that total sales are currently not running at the level that might have been expected, as the Brazilian market has recently contracted.
JP: I noticed that you use Kanban at this plant; are you seeing good results with this strategy?
FM: Yes, we have Kanban implemented for some processes. It’s part of the Faurecia Excellence System; it’s our standard. We have Kanban, we have JIT and JIS; all of these systems in terms of production control are part of our standard.
JP: And which company provides the injection-moulding machines?
FM: We have several – KraussMaffei, for example, the German company.
JP: The paint process is currently manual, so do you have any plans to automate?
FM: Not really; just one person is enough to do the job. Today, in terms of economy it is not feasible to change, measuring the investment against the payback. But the other plant here [Automotive Exteriors, São Bernardo do Campo] is completely automated; it’s another kind of business. For the parts that we paint here, that are just one colour, and just a few parts, what we have is enough for our needs.
JP: Do you intend to expand your production footprint in South America?
FM: In South America today we have enough of a footprint; it is in accordance with our strategy of growth. We opened a new plant last year in Porto Real, Rio de Janeiro State, to be close to Peugeot and Nissan. So our footprint is adequate.
As a growth strategy we have also established a joint venture with Magneti Marelli to open a new factory in Pernambuco to supply parts to Fiat at their new plant that is going to be launched at the end of 2015.