Someone who has the same name as myself had urged Chinese parts manufacturers for more than a year to go overseas and to buy parts houses at firesale prices. Why? Because they make much more money that way. The foreign parts houses mostly produce in China anyway. Often with huge Chinese manufacturers as subcontractors. By moving closer to the customer and up the value chain, by turning from contract manufacturer to marketer, the Chinese manufacturers could realize much higher profits.
A year later, this thought finally resonates in Detroit. Under the title “Chinese likely to be buyers of U.S. auto suppliers.” Crain’s Detroit Business runs a rather belated story.
“Chinese automotive suppliers are likely to be buyers of North American auto parts companies as the industry faces 12 to 18 more months of depressed volumes and tight credit, says Dietmar Ostermann, a director with the management consultancy PRTM in Addison, Texas.” And he gets paid for that? Or rather, he wants to sell a study with that deep insight?
Long before BeijingWest Industries Co. Ltd. bought assets of Troy-based Delphi Corp.’s brake and suspension businesses, Delphi had quietly unloaded assets in China. Other western parts manufacturers in trouble have dissolved their joint ventures in China, packed up, and gone home. Old story.
The next really big story is Chinese parts makers buying into big established Western brands. Much easier than buying a car company. Continental for instance, which had long morphed from a tire manufacturer to one of the world’s largest parts suppliers, had been teetering on the brink of destruction for a while and could be an interesting takeover candidate.
A buyer would get much more than brand recognition: Component makers such as Magna, Bosch, or Continental are deeply involved in the development of a new car. If you want to know what hits the market in 5 years, become a component manufacturer. Chinese parts manufacturers could make a great 5 year leap forward by picking up a Western component maker that is on its last gasp, because the bottom has fallen out of the razor-thin OEM market.
Sure they can copy parts easily over there, but do they have the engineering capabilities to design, develop, test?
The problem with manufacturing in China is loss of quality control, among other communication breakdown.
I’ve been inside screw machine manufacturers that make the internal components for ABS brake systems, and have seen the process for how they reject / accept the components.
With the output I’ve seen from China, the quality is nowhere near what I’d call aircraft quality, and thus no matter how cheap, I would not put my brand on it.
@tuneyfish
What I think he’s talking about is not copying.
It’s buying the whole manufacturer. The one who supplies to the car manufacturer directly.
In that case, they would be also getting the engineering know how. So this statement is very true
Chinese parts manufacturers could make a great 5 year leap forward by picking up a Western component maker that is on its last gasp
And you can bet they won’t be the only ones making such leap…
The Chinese companies will have to stand in line behind the Indians, who have been buying up US vendors for a few years now.
With all the talk of China, it’s interesting that Ford had to suspend the Oakville assy line because of a shortage of parts sourced in India. Of course in China there wouldn’t be a labor dispute like in India.
“The problem with manufacturing in China is loss of quality control, among other communication breakdown.”
As if American quality control is any better. Most companies that I’ve worked for only care about quality when the ISO9000 inspector is in the building, or when they lose a big customer.
Sure they can copy parts easily over there, but do they have the engineering capabilities to design, develop, test?
It’s time to abandon old cliches. Time moves on. US and European parts manufacturers have moved a great chunk of their production capacity to China a long time ago. If China would stop marking parts today, not a single car would be built in the US or India. As noted, a minor hiccup in India brought a whole Ford plant to its knees. You would be amazed how much of your “Made in the USA” car is actually made in Mexico. Ford, GM et al buy parts for billions of $ in China for OEM production. We are talking original parts, not knock-offs.
And you bet they have the engineering capacities to design, develop, test. I recently worked with a brake pad manufacturer that owns three multi million dollar LINK dynos for testing. The German certification company that did the ECE certification, owned none. I switched them to a certification company that owns one.
With the output I’ve seen from China, the quality is nowhere near what I’d call aircraft quality, and thus no matter how cheap, I would not put my brand on it. Fault of the buyer. If you buy on price alone, the Chinese will happily sell you cheap stuff. If you demand quality and pay a little more for it, they’ll happily sell you quality.
There are still plenty of issues with manufacturing in China in my experience;
1. Outright fraud; a product is agreed/contracted to be manufactured to a certain standard and lower grade materials are substituted. We’ve had this with; electronics, conveyor rollers, bearings and alloys. It’s EXTREMELY difficult to get action on this, but is improving.
2. Mentality; cheap/disposable is “OK”, we’ll just build it more often for you. They take the “hit” on replacement or return rate, effectively gambling on durability. Clearly this is a buyer problem too.
3. Human rights, working conditions; we went to a bearing factory which WOULD NOT be even vaguely allowable in “Western” countries. There were stories of injured workers etc, but of course we were hurried away. Again, getting action is hard, but is improving.
4. Batch selection; “special” runs of items to ensure testing passes. A client tested and returned two 40ft containers of water pumps that had different spec shafts to the ones approved via initial testing. Project delayed; massive costs incurred. Way more than getting them produced “right” the first time in Europe as they were eventually re-contracted.
“Boom” conditions made this all the worse.
I could go on and on, but I don’t work in this area anymore thankfully.
Great advances have been made, but the major problem is ensuring action is taken for correction. Local officials are bought and sold – they can’t even build schools for their own children that stay up in some areas.
These are not unique to “just” China, and are to an extent generalisations. It’s hard work manufacturing in China – you have to ride quality very very hard if you want it.
^Bertel, well said. Do your homework and you get what you pay for over here, be it auto parts or t-shirts.
Do your homework and you get what you pay for over here, be it auto parts or t-shirts.
T-shirts? I’d send t-shirts to Indonesia, much cheaper.