Doing the GM Samba

December 11, 2000

For Brazilian motorists with access to the Internet, buying a new car is now just a couple mouse clicks away.

Since the launch of its new Celta subcompact last September, more than 55 percent of the Brazilians who’ve bought General Motors’ so-called "Popular Car" have placed their orders online. And "the number could rise to 80 percent" over the next few months, predicts Fritz Henderson, head of GM’s Latin American sales operations.

It helps that GM do Brasil is offering buyers a six-percent discount for online purchases—about $400—and making it easier for Web-savvy shoppers to custom-order precisely the vehicle they want without having to wait for months before taking delivery.

Initial results are so positive, GM officials say they now intend to use the Brazilian Web site as a model for projects in the U.S. and other parts of the world. "This is a launch-and-learn effort," explains Mark Hogan, head of eGM, the automaker’s high-tech business unit. "We’re trying to launch in Brazil and then spread it to other major markets."

Indeed, GM’s Saturn division could begin direct, online sales as early as this coming year, though Hogan cautions that a final date has yet to be set.

The Chevrolet Celta, which sells for just under $7000 through normal channels, is the newest car in GM do Brasil’s line-up. With its tiny, 1.0-liter engine and a minimum of creature comforts, it’s designed for the country’s largest—and most competitive—segment, and goes up against other so-called Popular Cars, such as the Ford Fiesta and Fiat Palio.

Competition is fierce in this entry-level segment, which accounts for about 60 percent of Brazilian new car sales. So, despite government incentives, it’s hard to make a profit, industry observers note. That’s spurring intense cost cutting, and forcing manufacturers like GM to rethink everything "from design to distribution," says Hogan.

The Celta, for example, is built at the recently opened Blue Macaw plant in Brazil’s southernmost state of Rio Grande do Sul. Extensive use of modular assembly has reportedly cut production costs significantly. To support that system, 17 key suppliers have set up shop on the grounds of the Blue Macaw complex, and are linked electronically to GM. Add the fact that Celta is offered with only a minimum of colors and options, and that helps GM do Brasil to minimize inventory, and gear production to demand.

For the moment, GM is using customer orders to model production; it then ships vehicles to regional distribution centers. Dealers maintain only a couple Celtas, at most, on their lots, but when they sell a Celta, a vehicle meeting the customer’s specification is rushed to showroom, usually within four to seven days.

Eventually, "it is part of our vision" to create a true build-to-order, or BTO system, says Henderson, where Celtas would be produced only when an order comes in. The challenge is not so much the production process, explains Henderson, but Brazil’s vast size and its primitive transportation network.

Dealers on the inside

GM chose not to cut its Brazilian dealers out of the Celta process. They remain the point of delivery, though they receive a lower commission for Internet sales. That’s one reason why GM claims its margins are larger on Internet Celta sales than for vehicles sold through traditional methods. Ironically, the showroom is the place where at least 95 percent of Celta buyers actually go online to complete their purchase.

"The customer, to date, hasn’t yet become comfortable buying a car online," acknowledges Henderson.

Though many buyers use their home or office computers to check out the Celta site and spec out the vehicle they’re interested in, most still want to take a test drive, and discuss issues, such as financing, with a dealer. But lured by the six-percent discount, most then turn to the dedicated, Celta Online kiosk GM has set up in each of its Brazilian dealerships. Eventually, the automaker is betting that a growing number of consumers will complete the purchase process at home.

In that sense, things appear to be following a similar path in the U.S. Surveys by organizations, such as J.D. Power & Associates, show anywhere from 50 percent to 75 percent of American auto buyers will have gone online during some point in the purchase process this year. But depending on the study, the number actually clicking the "buy" button is no more than five percent, and probably closer to two percent.

But that’s still enough to get the industry interested in pursuing online sales. Saturn will have a direct buying site operation "in the near future," according to Hogan. "I’d like to say in ’01," though that target could be pushed back a year or more. Celta Online will provide a model for Saturn and other GM ventures online.

Saturn is also in the best position of all GM divisions to adopt the BTO concept, at least for now, company officials note. But GM is getting ready to launch two new plants in Lansing, Mich., and both of those facilities — neither producing Saturn products — have been specifically designed with a build-to-order model in mind.

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