KT photo | Tim Bath
AN UP-CLOSE LOOK: A worker monitors production of a circuit chip on General Motors Components Holdings Kokomo Operations’ FAB III line. Last month, company officials unveiled an updated business plan to revamp the Kokomo facility.
A handful of employees, clad in white disposable gowns and breathing masks, stood at their stations in their work area’s yellow lighting.
The semiconductor wafer fabrication line they worked in produces integrated circuit chips that have gone into engine controls, air conditioners and other basic vehicle devices.
The facility, with its ultra violet ray-extracting lighting, particle accelerators and almost entirely automated manufacturing process, has grown outdated, said automotive industry analyst David Cole.
The company, General Motors Components Holdings Kokomo Operations, last month unveiled a new business plan that managers say could keep the FAB III line, as well as GM’s other operations in Kokomo, alive.
The FAB III, as a part of then-Delphi Corp., used to have trouble keeping up with the demand for its products. But then layoffs began in the early part of the decade.
“I remember visiting several years ago,” Cole said. “It was absolutely state-of-the art, but when you look at the world today, the ability to make chips is, every year, becoming more advanced. ... If you look at the new fab facilities, they’re much more productive than the old ones, with the efficiency with which you make the chips.”
The General Motors Co. subsidiary took over the operations from Delphi when the companies emerged from bankruptcy. GMCH also includes operations such as thick-film printing and electronics assembly.
In July, General Motors’ corporate office issued a statement that it was “assessing its business model” for the FAB III line in Kokomo. That led to concerns about whether the GMCH-owned facility in Kokomo would still be open in a few years.
The company formed a team of managers in Kokomo to plan out the business’ future.
Along with adopting standardized efficiency practices, the company has turned to finding buyers outside the automotive industry. The products from GMCH’s manufacturing lines once sold only to GM and Delphi, but the company is now looking at industries such as green energy and telecommunications.
If the business plan is successful, it could save jobs at the 1,000-employee factory, managers say.
Brian King, business development manager for GMCH Kokomo, said the company hasn’t signed any contracts with buyers, but it has a lot of prospects.
William Cory Stanley, the president of United Autoworkers Local 292, said in an e-mail morale has been down since employees learned the FAB III line might not stay open. But the union, which represents GM workers in Kokomo, is optimistic of the push to find new customers, he said.
“I’ve been working at our plant for 11 years, and it has always been common knowledge that FAB III was our anchor,” he said. “It is really hard to change gears and believe that we can survive without this part of our operation. I remain encouraged by the prospects of replacing the lost portion of this business with a concerted effort by both management and the union.”
GMCH is looking at industries such as energy and aeronautics to sell its semiconductors to, because the products coming out of Kokomo are “robust” enough for devices such as solar panels, but not intricate enough for microprocessors in computers.
The question is what direction technology trends will go, King said.
Consumer demand is going toward smaller, more complex IC chips and related products, which the plant manufactures. But the problem comes with the ability to produce those efficiently in Kokomo, he said.
“You’re trying to predict technology advancements,” he said. “We just don’t know where it’s going to go.”
Cole, who is the director for the Center for Automotive Research in Ann Arbor, Mich., said the software that goes into chips is becoming more important than the actual chips.
“They’re building bushels of IC chips,” he said. “But what really counts is the apples or the peaches that go into the baskets. That makes them vulnerable. The costs and quality needs to be impeccable to be competitive.”
The technology produced at GMCH, as with most American-made IC chips, has had trouble keeping up with the Chinese and Japanese markets, he said.
But in many cases, Cole said, companies don’t need complex chips or other semi conductor products.
“You’re not going to buy a super premium chip if you don’t need to,” he said.
A CLEAN SLATE
GMCH, then-Delphi, about three years ago implemented the business regiment The Five-S System: sort, set in order, shine, standardize and sustain.
“Some say it’s just a process to clean up,” said Kent Eaton, personnel director at GMCH Kokomo. “It is more than a process to clean up. It is how you do business.”
The system is an organization technique that minimizes wasted time and other resources. It ranges from getting rid of unused pencils to monitoring how much time employees spend carrying a product from one manufacturing station to another, King said.
The concept is intended to develop mentalities toward jobs more than anything, he said.
Stanley said the consolidation of facilities has resulted in some layoffs of employees with skilled trades.
GMCH has also applied the system’s fundamentals to a recycling program.
While getting rid of unneeded equipment and pushing manufacturing operations and offices closer together, the company began collecting everything it planned to get rid of, said Tim Guse, a manager in the thick-film printing area.
The company began selling off the unused material as scrap as a way to bring in more revenue.
“Just looking at tape, we have miles of it, literally,” Guse said.
The plant became a “zero landfill” site in September, Eaton said.
INVESTMENTS ARE KEY
The best indication of whether the FAB III line and the rest of GMCH Kokomo will survive will be whether the motor company invests in the operation, Cole said.
King said the majority of business growth and investment will be locally driven.
Stanley said working with GM’s corporate office, as well as upper management at UAW, has resulted in frustration.
“I wish I could explain the frustrations I have as the president of our local union when [management and union] work through some very hard fought discussions, only to have someone above decide to turn it down.”
GMCH Kokomo won’t upgrade any of its equipment until it has new clients and it knows what they specifically need.
Cole said that practice has become common.
“There used to be a time when the work force knew four or five years in advance what was going to be made in that factory,” he said. “Because of advances, they can delay decisions until as close to market point as close as can be.”
More investments also need to come from state and local government, said Larry Wallman, a former president of the Indiana Chapter of the International Microelectronics and Packaging Society.
There have been too many cases, he said, where Indiana has lost electronics jobs and officials didn’t do enough to find new ones in that industry.
“We could’ve gotten wafer fabs in to compliment [GMCH] in case there’s a cutback at that one,” he said. “We could have diversified a little bit. ... We’re so narrow-focused, from a city and state point of view, on automotive that we’ve never developed our base.”
• Daniel Human is the Kokomo Tribune business reporter. He can be reached at 765-454-8570 or at email@example.com.