[iht] The Workplace: Robots in low-cost lands

The Workplace: Robots in low-cost lands
Thomas Fuller International Herald Tribune

TUESDAY, APRIL 11, 2006


PLUAK DAENG, Thailand General Motors pays its entry- level workers a little
over $200 a month to assemble pickup trucks and passenger cars in this
tidy, modern facility southeast of Bangkok.

At that salary, employees are roughly on a par with Chinese workers,
expensive by Vietnamese or Indonesian standards and of course dirt cheap
compared with Japan, Europe or the United States.

Alas, the crude calculations of a globalized manufacturing world: comparing
the cost of a human being's sweat.

With workers at the GM plant here making in a month what some senior
assembly line workers in the West earn in a day, you might think the
company runs a very labor- intensive operation.

Yet what is most surprising in the cavernous factory here is the lack of
manpower in some crucial parts of the assembly process. Instead, there are
robots swinging, poking, grabbing, welding and stamping, all part of a
precise dance that churns out a vehicle about every six minutes.

Why bother with million-dollar robots when you have people who will work
for $10 a day?

The answer, say GM executives and other industry analysts, is that cheap
labor is not a panacea, especially in a relatively high-technology industry
like carmaking. For a variety of reasons, including safety, automation is
necessary even in countries where an army of cheaply paid workers is
readily available.

"Some things can't be done safely by people," William Botwick, president of
General Motors Thailand, yelled over the din of a stamping machine as it
crushed steel into side panels and chassis. "So you need a robot."

There is a widely held perception in Europe and the United States that
Asian countries will progressively win all manufacturing jobs because
workers are prepared to toil for so little. But while companies in many
industries have moved their operations to Asia, the complex equation of
timeliness, quality control and cost in the auto industry dictates that car
production is not as easily outsourced as sewing a shirt or a pair of
pants.

Significantly, labor is a small fraction of the total cost of producing a
car in both rich and poor countries. Hajime Yamamoto, an independent auto
consultant based in Bangkok, recently conducted a study comparing costs at
Japanese-owned factories in Japan, arguably the most sophisticated
automaking country, and Thailand, a middle-tier, lower-cost producer.

In both countries, the largest single cost of assembling a car - by far -
was the actual materials, everything from the steel in the chassis to
outsourced engine parts and the rubber in the tires.

Materials amounted to 80 percent of the cost of the car in Japan and 86
percent in Thailand. Labor took up about 9 percent of the total factory
cost per car in Japan and 2 percent or 3 percent in Thailand.

In a nutshell, Thailand compensates for more expensive steel and other
materials with cheaper labor.

Wages are certainly not irrelevant in carmaking. Leveraging its relatively
low wages, the GM plant here exports cars around Southeast Asia and to
Australia, the Middle East and Mexico. But distance has a downside, too. It
costs about $700 to ship a car to Australia and about $1,100 to ship one to
the Middle East, mitigating the advantage of low- cost labor. Long
distances also may frustrate customers because of the lag between ordering
a car and delivery.

"That's why you want to sell where you build and build where you sell,"
Botwick said. GM has built nearly identical factories in China, Latin
America, Poland and the United States. By the same logic, Japanese
carmakers have built factories across the United States in recent years.

Deciding on the level of automation in these far-flung manufacturing plants
depends on several factors, but the main consideration is volume: robots
work much faster, more efficiently and with less risk of accident than
humans in certain jobs, and they can make sure there are no bottlenecks in
the process.

"When you're producing 10,000 units, it may not make sense to have
robotics," said Michael Dunne, president of Automotive Resources Asia, a
consulting company. But there is a "tipping point," he said, where using
robots becomes cost effective, even in low-cost countries.

Yamamoto cites a more intriguing reason carmakers choose automation. Newly
built Japanese factories in China use robots intensively despite relatively
low labor costs, he said.

"The workers don't have much experience," Yamamoto said. "Instead of
educating them, they prefer to use more robots."


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-pluto
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