Shipping cost may cut into overseas outsourcing at GM
Automakers have long tried to reduce the cost of parts by sourcing more items from suppliers in low cost countries. Until now, the cheap labor overseas was enough of a savings to cover the cost of shipping parts back to North America. But, the increased cost of fuel means that it suddenly costs a lot more to send components from places like China, India and elsewhere to the U.S. GM VP of Purchasing Bo Andersson has said the company will look on a case by case basis at sourcing suppliers closer to its assembly plants to help reduce transportation costs. Smaller parts like radios that don't cost much on a per piece basis may still come from overseas, but larger, heavier items like wheels probably won't. Fuel costs aren't the only deterrent to importing parts. The plummeting value of the U.S. dollar also makes domestic suppliers relatively cheaper now. [Source: Reuters]
Reader Comments (Page 1 of 1)
fnc 6:26PM (6/28/2008)
Back when "globalization" first became a popular concept with businesses, I wondered if any of them had even bothered to consider that the concept rested pretty firmly on having plentiful cheap fuel to push all this stuff halfway around the world.
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mike baz 8:51AM (6/29/2008)
I think this article inadvertently points out the 1 - 2 punch that the Federal Reserve (neither Federal, nor a reserve, look it up) is intending by devaluing the dollar:
1- reduce the actual value of America's debt, to its own citizens (ie social security...) and bond holders (mostly foreign nations holding US bonds as reserves)
2- impoverish American wages to the point where America labour can be at par with say Chinese labour
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jpm100 9:57AM (6/29/2008)
Somehow those components get cheaper to ship when installed in a car and shipped here. The physics of currency manipulation.
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rob 10:47PM (6/29/2008)
Woo hoo. The US is now the low cost country!
I dug up this old Ward's article about Bo's brilliant idea to send parts from overseas via airplane.
http://wardsautoworld.com/ar/auto_article_11/
The guy is so into the month-to-month profit mentality that he just can't grasp that in the long run he is losing money on the deal. Now all of the overseas production is going to come at a price premium because all of the capable US suppliers are now gone....
Based on the profits that GM has made during his tenure, I would reconsider anything he proposes...
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Mcklain 7:24AM (10/31/2008)
Hey thats really great to know that US is now offers low cost on Shipping Services. Thanks for such a reliable services.
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