Supply Chain Strategies for Economic/Environmental Cooperation in China

Elizabeth A. Lowery

Vice President, Environment & Energy

General Motors Corporation

Global vehicle sales of nearly 9 million units in 2004

$193 Billion in Total Revenue in 2004

14.5% of the Global Vehicle Market

Over 300,000 Employees Worldwide

Manufacturing Operations in 32 Countries

Vehicles sold in 200 Countries

Over $80 Billion in Purchased Goods

9.3% Market Share in 2004

13,000 Employees

Current Vehicle Sales Leader

492,000 Vehicles Sold in 2004Second Largest Market for GM

China

7 Joint Ventures and 2 Wholly Owned Foreign Enterprises

Our Environmental Commitment

A GM commitment to a safe and healthy environment was first articulated as a corporate policy more than four decades ago.

The GM Environmental Principles were adopted by the Corporation in March 1991 to reaffirm this commitment.

The Environmental Principles apply to GM operations worldwide.

GM Environmental PrinciplesAs a responsible corporate citizen, General Motors is dedicated to protecting human health, natural resources and the global environment. This dedication reaches further than compliance with the law to encompass the integration of sound environmental practices into our business decisions.

The following environmental principles provide guidance to General Motors personnel worldwide in the conduct of their daily business practices.

1. We are committed to actions to restore and preserve the environment.

2. We are committed to reducing waste and pollutants, conserving resources and recycling materials at every stage of the product life cycle.

3. We will continue to participate actively in education the public regarding environmental conservation.

4. We will continue to pursue vigorously the development and implementation of technologies for minimizing pollutant emissions.

5. We will continue to work with all governmental entities for the development of technically sound and financially responsible environmental laws and regulations.

6. We will continually assess the impact of our plants and products on the environment and the communities in which we live and operate with a goal of continuous improvement.

Why focus on the supply chain?

GM Environmental Principle #2 states:

“We are committed to reducing waste and pollutants, conserving resources and recycling materials at every stage of the product life cycle.”

This includes working with our suppliers to improve environmental performance and lower costs.

This approach will allow them to become better suppliers to GM with a focus on continuous improvement.

GM Supply Chain Initiatives

Supplier Environmental Advisory Team

“Greening the Supply Chain” Saturn/U.S. EPA

Supplier Partnership for the Environment

China “Greening the Supply Chain” Initiative

Supplier Environmental Advisory Team

Formed in 1998 to strengthen environmental approach to the supply chain

Cross-functional representation of GM business units including, Supplier Development, Advanced Purchasing, Worldwide Facilities Group, GM Audit Services and Public Policy

The team established 3 main objectives:

• Improve mutual understanding of environmental programs

• Improve the effectiveness of existing GM initiatives

• Develop and evaluate new ideas that promote eco-efficiency

“Greening the Supply Chain” Saturn/U.S. EPA

Formed in 1997 as a partnership between Saturn, U.S. EPA, and the University of Tennessee Center for Clean Products and Clean Technologies

Pilot project focused on improving the life-cycle performance of Saturn vehicles and the Saturn supply chain

For example, four suppliers for the Saturn VUE identified 16 environmental improvements ranging from reductions in energy usage to solid waste avoidance

The demonstration projects economic value was estimated to be $374,000 to $464,000 with full implementation

Supplier Partnership for the Environment

Formed in 2003 between GM, U.S. EPA, and Automotive Suppliers to increase the business performance of companies while reducing environmental impacts

• Provides a forum for companies to work together to share “best practices”

• Provides facility-specific technical assistance on energy and materials use optimization

• Leverages the resources of federal agencies such as the National Institute of Standards and Technology’s Manufacturing Extension Program to conduct “lean and clean” workshops

Supplier Partnership for the Environment

SPE has grown to 32 member companies including GM, Daimler Chrysler, Lear, Johnson Controls, Delphi and Visteon

Small and medium suppliers have participated in the NIST “Lean and Clean” workshops

• Over $1 million in environmental and lean manufacturing savings have been identified from 6 workshops

China “Greening the Supply Chain” Initiative

Why China?

•GM’s fastest growing market

•Small and medium enterprises make up 80-90% of the economy

•Opportunity for capacity building in the supply chain

China “Greening the Supply Chain” Initiative

Why the World Environment Center?

•Broad experience with supply chain projects in Mexico and South America

•WEC member companies Dow and Johnson & Johnson are pleased with progress of their projects

•Developed successful capacity building projects that have produced environmental improvement and cost savings

•Strong technical resource in China

Greening the Supply Chain Project Approach

China “Greening the Supply Chain” Initiative

Formed in 2005 between GM China, World Environment Center, Society of Automotive Engineers – China

Initial pilot project will focus on capacity building in “clean production” techniques with a small group of automotive suppliers to SGM and SAE

Objective of the project is to identify opportunities to reduce environmental impacts while lowering the operating costs of suppliers

Suppliers will participate in a training session to help them assess their operations and develop plans to implement “clean production” practices

China “Greening the Supply Chain” Initiative

Supplier participation from:

•Chassis components

•Seat systems

•Paint

•Wheels

•Engine components

China “Greening the Supply Chain” Initiative

Project expectations:

•Identify cost saving/environmental improvements in the supply chain

•Implement the improvements at the supplier facilities

•Grow the project beyond the pilot

Examples of progress at GM

Energy reduction

Water reduction

Waste reduction

Recycling improvements

Safety performance

Established energy goals in 2000

Added to the Manufacturing Scorecard

Achieved goal 2 years early

13% reduction through 2004

Sharing of best practices:•Cold shutdowns•Compressed air reduction•Paint shop shutdownsduring non-production•EMS and metering•Lighting initiative•Plant temperature stds

Energy Reduction

Established water reduction goals in 2000

Added to Manufacturing Scorecard

23% reduction through 2004

Sharing of Best Practices

Water Reduction

GM Global Waste Produced(thousand metric tons)

0500

1,0001,5002,000

2,5003,0003,5004,000

4,5005,000

2000 2001 2002 2003 2004

Recycled

Non-Recycled

11.5% decrease

As reported in 2005 CRS Report

GM Global Percent of Waste Recycled

82.1% 83.4% 84.4% 85.0% 86.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004

4.4 percent increase

As reported in 2005 CRS Report

Corporate Responsibility in Action:Employee Safety

Values

Principles

Behaviors

Results

Cultur

e

Strategies

Performance

Respect for the Individual

Employee Safety is Overriding Priority

Focus Everyone on Prevention

Enhance Safety Protocols; SupportInitiatives; Global Monthly Reporting

Benchmark for Safety

WordsDeeds

Deeds

Summary

GM has participated in successful supply chain projects that improve environmental performance at lower cost

Partnerships are key to success

Baseline assessments followed by goal setting has worked effectively for GM

Sharing of best practices is essential

Economic and environmental considerations are mutually compatible with this approach