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Parts with passports: GM’s NAFTA road to production

Credit: Reuters Studio
Published on November 18, 2019 - Duration: 03:34s

Parts with passports: GM’s NAFTA road to production

Some of the parts and components that go inside a General Motors automobile should come with passports since they cross the U.S. border several times thanks to the North American Free Trade Agreement between the U.S., Canada and Mexico, which President Trump has vowed to update or scrap altogether.

Conway G.

Gittens takes you along for the ride.

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Parts with passports: GM’s NAFTA road to production

24 0 BROADCAST AND DIGITAL RESTRICTIONS~** Broadcasters: NONE Digital: NONE~** Before this engine even goes under the hood of a General Motors automobile - the sum of its parts have already racked up some serious miles, and not all of them within America's borders.

Powdered steel from Tennessee is shipped to Pennsylvania and used to form connecting rods for pistons.

Those piston rods are then sent across the northern border to Canada where bolts and other vital components are added on.

But the manufacturing isn't done yet and neither is the journey for these parts.

Next, they're sent all the way down from Ontario, Canada to Mexico where rings and seals are added.

The final step: completed rods are individually wrapped and carefully loaded onto trucks for a road trip back to the U.S. to this GM engine plant in Romulus, Michigan.

The parts combined have crossed borders four times without getting hit with any tariffs.

This is the world of manufacturing supply chains: where factory operators like GM pull together raw materials, parts, and labor from wherever they can get it the cheapest to keep total production costs down.

Jim Bovenzi is executive director of the global supply chain for General Motors.

SOUNDBITE: JIM BOVENZI, EXECUTIVE DIRECTOR OF GLOBAL SUPPLY CHAIN, GENERAL MOTORS: "Right now there are pockets of expertise that exists in certain locations and if those borders were to close or to change, even availability could be an issue for a company the size of General Motors, as well as competitiveness, again, certain products are best produced in certain areas and having access to a larger region gives us a greater deal of competitiveness." In GM's case - and for Detroit's other members of the big three - Ford and Fiat Chrysler - free-trade between Mexico, the U.S. and Canada can only happen profitability because of the North American Free Trade Agreement.

But President Trump has threatened to rip up the 25-year-old pact if he doesn't get his version through Congress.

His replacement - the United States Canada and Mexico Agreement, or USMCA - is designed to force U.S. automakers to build more vehicles and components like these in the U.S., using higher-paid American labor.

Automakers worry that will push up labor costs and ultimately the final sticker price.

But that worry is nothing compared to what would happen if there's no trade agreement at all.

Take the 400,000 V6 engines pumped out of this GM assembly floor a year - of major suppliers: 67 are from the U.S., 13 from Mexico, 8 are from Canada and 12 from shores even farther away, with most of the electronics coming from Asia.

Any trade disputes or hold-ups at the border are a headache.

SOUNDBITE: JIM BOVENZI, EXECUTIVE DIRECTOR OF GLOBAL SUPPLY CHAIN, GENERAL MOTORS: "We run a lean supply chain.

Typically a plant will have less than a day's worth of a material in their four walls as a buffer and so a disruption or a delay at a border can wreak havoc in a supply chain." And GM can't afford that.

Now fully assembled, these engines take an 8-hour drive south from Michigan to Tennessee….where - hopefully waiting for them - are more than 5200 parts including more from NAFTA partners Mexico and Canada - which all go into making the Cadillac or GMC SUVS headed for U.S. roadways.

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