This paper draws upon on-going research into the changes taking place in the Brazilian vehicle assembly industry with particular reference to the state of Rio de Janeiro. It focuses upon a case study of Volkswagen's bus and truck assembly plant at Resende. The plant opened in 1996 on a green-field site and was presented as a major development in vehicle assembly. The unique feature of the plant's production system rests on the relationship between the assembler (VW) and its component suppliers. At Resende these were involved in a joint enterprise to establish a ‘modular system’ of production. In this system, the component suppliers finance a part of the factory and organise the assembly of their components on site. As such few of the production workers are employed by the assembler whose main role in the process is to co-ordinate production and market the vehicle. The article outlines the nature of the Resende system and the negotiations and comment that accompanied its introduction. It considers the development in relation to literatures on the boundary and capacity of the firm and those relating to the role of labour in mature labour processes. In drawing upon wider changes in the Brazilian vehicle manufacturing sector it argues that the Resende experiment can be understood as an extreme case of a more general development in Brazil, involving changed relationships between assemblers and component suppliers and also with the manual workers. Some consideration is given to the idea of an emerging ‘Brazilian system’ of production and its implication for more general developments within the sector.