Battered auto parts makers in Japan are surviving on a diet of non-auto parts.
Today’s Nikkei [sub] has it that companies like Toyoda Gosei,. NHK Spring Co. and other auto parts makers are earning an ever greater proportion of profits from electronics components and other businesses not related to cars.
Operating profit at Toyoda Gosei’s non-auto-related business is seen skyrocketing 230 percent on the year to 3.5 billion yen in fiscal 2009, thanks to surging demand for LED lights used in laptop backlights. Their auto-related operations are down 56 percent in operating profit.
Stanley Electric Co. sees a growing demand for LED products for personal computers. Demand for precision equipment parts for hard disk drives is brisk at NHK Spring. At NOK Corp., sales of flexible printed circuits for hard disk drives and cellular phones are picking up. So if you don’t buy a car: Help a parts maker out. Buy a laptop.
The title tells it all! Either these companies will find new products to produce and sell, or not. If not, a new company will fill the void.
Gosh, imagine that, after all those years of consultants chanting “reduce to the core and grow” … 2nd shocker … many of these compaines are going to collapse or be forced to merge if they fail to diversify fast enough (or not at all) as their current technological portfolios have declining relevance in the upcoming generation of cars … (It doesn’t just have to be IC displaced by electric … efficiency also has the same effect … while there is turbocharger sales growth for Borg or Honeywell, unless Ecoboost pistons sell at a premium, I’d say for such applications, Mahle, Federal Mogul, or Kolbenschmidt is selling 25% fewer pistons… same for valves, camshafts, etc. and this just increases if the shift to hybrids or plug-ins accelerates …
I work for a major auto supplier, and I have to agree with newcarscostalot.We have in our division turned away non-auto customers who have begged us make complex highly profitable low volume products for them, and our management has always responded by saying that even though it may make sense to do it, it is not “core business” and hence we are not going to do it. So much for innovation!
The problems of headline writing…my first thought on reading this one was “Please save us from non-auto parts!” But then reading udham’s post above, well, that seems to be the way his employer sees it. Time for udham to be working on his resume…?
Indeed, the “core business” mantra is one of the many dumb idea which has taken hold in so many management circles. I really think that the MBA educators have a lot of ‘splainin to do for their role in fracking things up.
Out in the garage of my second property is a huge chest type freezer, made by of all companies International Harvester. It was built just after World War two and still runs as well as the day it was delivered. Diversification isn’t new, and it doesn’t hurt a bit.
Auto parts manufacturers either could go with medical supplies or adult toys – two fast growing markets.
BTW, Robert Bosch is one of the world’s largest auto parts suppliers and is a very diversified industrial company. The semiconductors which make up a large part of the value add in modern automobiles come from companies which by and large make semiconductors for a vast array of end markets. The steel, aluminum, plastics, rubber and paint companies which supply so much of the inputs to auto manufacturing also generally serve a diversified customer base. In many ways, the odd men out in this game are the pure-play automotive materials, parts and component suppliers.
Bosch dominates the market for Diesel Fuel Injectors