Roy Cokayne
General Motors South Africa (GMSA), in partnership with component manufacturer Tenneco South Africa, has been awarded a contract worth R6 billion to export catalytic converters to North America.
The catalytic converters will be manufactured at Tenneco SA’s clean air plant in Port Elizabeth and supplied for GM’s next-generation V-6 engines for use in vehicles built and sold in North America from 2015 to 2022.
Ken Dewar, the executive director of the Catalytic Converter Interest Group (CCIG), said yesterday that this was the most significant catalytic converter contract awarded to South African companies since 2008, when Volkswagen South Africa and catalytic converter and exhaust systems manufacturer Eberspächer South Africa won a five-year contact worth R12bn to supply Volkswagen Group with diesel particulate filters.
Dewar said the contract was “nice to have” but he was not tremendously hopeful that it was likely to be a portent of things to come.
The CCIG last year warned that the industry, which supports 5 200 direct jobs and a further 30 000 indirect jobs, was under threat because of a lack of clarity about long-term government policy and support.
However, Mario Spangenberg, president and managing director of GM Africa, said the decision to award this contract to South Africa was “a great show of support by our parent company, as it comes ahead of a clear legislative framework by the South African government to support the strategic growth of exports”.
Spangenberg said the programme was a major boost to the Eastern Cape economy because it would create and retain employment.
In addition, the mining sector would benefit from a projected requirement of 10 tons of platinum group metals over the duration of the programme.
Lunga Ntsendwana, a GMSA spokesman, said the contract replaced an existing order but on a bigger scale, with these catalytic converters being used on a broader GM product portfolio.
This meant one in six vehicles that GM sold would feature catalytic converters supplied from South Africa. GMSA and Tenneco South Africa had worked together for more than 12 years to produce catalytic converters and related components for the North American market.
GMSA currently exports 2.6 million catalytic converters a year for application on 17 percent of GM vehicles produced globally.
Ntsendwana said GMSA was able to make the business case for this contract work through various logistics consolidation initiatives and currency management processes throughout the supply chain.
He said GM was also taking a strategic view on beneficiation and aiming to work with the government to achieve a workable solution and the continuation of the Africa Growth and Opportunity Act.
GM international operations vice-president of global purchasing and supply chain Johnny Saldanha said that supplier operations in South Africa were competing with others around the globe.
To attract business, suppliers needed to be globally competitive in both cost and productivity and operate in an enabling economic environment supported by a stable labour force, he said.
Dewar said South Africa supplied about 10 percent of the world’s catalytic converters now, compared with about 16 percent in 2007. The industry made everything for a catalytic converter “pretty much from start to finish” and was a good example of beneficiation.
“This is one of the reasons we don’t understand why government isn’t as excited as we think they should be about the industry,” he added.