GM moves engineering work to Asia slowly; global operations create work in U.S. - for now

ALYSHA WEBB | Automotive News and PETER CHANG | Automotive News
Posted Date: 11/26/04

It's a trickle now, but engineering work at General Motors is moving from North America to Asia.

In Korea, GM Daewoo Auto & Technology Co. says it is developing much of the redesigned Saturn Vue, which will be assembled in North America in 2007. The current Vue was developed in North America by engineers at GM and Suzuki Motor Corp.

In China, GM is using its Shanghai design and engineering operation to work on engine parts and other components for the Theta sport-wagon platform. That platform is used for the Vue, Chevrolet Equinox and next-generation Suzuki XL7, due in 2006.

Not a one-way flow

The work moving to Asia is not a one-way flow out of the United States. In fact, says GM spokesman Tom Wilkinson, the Asian engineering centers are creating work for U.S. engineers in the short term as the two continents develop vehicles for both continents jointly.

But how will the Asia centers affect long-term employment of engineers in the United States?

"I don't know," Wilkinson says.

Wringing costs out its engineering operations has been a high priority at GM. From 1992 through 2000, GM North America consolidated 11 engineering organizations into one group, reducing U.S. costs by 40 percent during that time, GM says. The company said head counts of engineers before and after the consolidation are not available.

The number of engineers in North America is "probably slowly declining as we continue to pick up efficiencies and take cost out," Wilkinson says. Linking engineering centers around the world allows "work to flow where it needs to flow."

GM's Asia operations are benefiting.

The automaker's Shanghai engineering operation, called the Pan-Asia Technical Automotive Center, or PATAC, was established in 1997. It is a 50-50 joint venture of GM and Shanghai Automotive Industry Corp. The two also are partners in four manufacturing ventures and an auto financing company.

Almost all parts that PATAC engineers worked on in the operation's early years were designed and approved for use, or "released," by engineers in the United States, says one source in China, a former PATAC engineer. PATAC simply integrated the parts, that is, tweaked them so they worked together.

That is changing. Important parts such as camshafts and pistons still are designed and released in the United States, he said. But some parts - such as brackets and heater pipes - are designed and released in China.

North American engineers supervise the Chinese engineers' work through weekly conference calls and quarterly visits to China.

GM says it would like to see PATAC's role increase so it can eventually engineer a complete vehicle.

Wilkinson says that PATAC could eventually engineer a vehicle for the United States, "but China has an immediate need first" for PATAC's output.

Lower pay in Asia clearly is an incentive to send work there. In China, an engineer with five years of experience who is a team leader can make $43,000 a year, say engineering sources in China. GM Daewoo says the average salary of its engineers is $42,000.

In the Detroit area, the average salary for an engineer with about five years of experience is $72,814, says the American Society of Employers in Southfield, Mich., which tracks pay for area companies.

But low pay is not the only factor behind GM's decision to use Chinese engineers.

Large bureaucracy

"The bureaucracy is much bigger in the U.S.," says the former PATAC engineer. "They are doing it in China because it is faster."

In Korea, GM Daewoo's engineers are developing a sport wagon from GM's Theta platform for Korea in 2006. GM Daewoo showed a concept of the sport wagon, the S3X, at the Paris auto show in September.

GM will build on GM Daewoo's engineering work on the Theta vehicle when it develops the next-generation Vue in North America, says GM's Wilkinson. The Vue is a Theta vehicle.

A source in North America says that GM Daewoo could receive responsibility to design the next-generation Theta platform. But no decision has been made.

Meanwhile, GM India is producing GM Daewoo's Lacetti cars from kits. Ki-Joon Yu, vice president in charge of GM Daewoo's Technical Center, says that GM eventually will give GM India more production and engineering ability as sales in India grow. Yu also coordinates GM's engineering operations in Asia.

GM has given its operations in Australia, Holden Ltd., the assignment of designing a new generation of rear-drive cars on a platform called Zeta. Some of those cars, including a Buick flagship sedan and a redesigned Pontiac GTO, will be assembled in the United States. The Buick will be first in 2006.

To ease the flow of work around the world, GM is installing the same information and computer systems in all of its engineering centers.

Engineering work will flow increasingly overseas, driven by efficient computers, lower costs and the need to speed vehicles to market.

Important parts such as camshafts and pistons still are designed and released in the United States, he said. But some parts - such as brackets and heater pipes - are designed and released in China.