Chinese suppliers see US as a land of opportunity

By Steven Ribet, Automotive News

Shanghai, China - For Chinese suppliers, dark clouds over the North American auto industry have a silver lining. Cost cutting in Detroit, they think, could push more business their way.

"Our products are high-quality," said Jane Huang, a saleswoman working at Wuxi Yongkaida Gear Co. "We're hoping this is an opportunity to increase our market share."

Wuxi Yongkaida makes sprockets at a factory in the coastal province of Jiangsu and ships some of them to Eaton Corp. in Ohio.

Huang spoke here last month at a sourcing fair organised by Gasgoo.com, a Web site that connects Chinese suppliers and automakers.

But while they see opportunity, many Chinese suppliers are still gaining the engineering expertise and quality control to supply parts overseas.

After growth, exports fall

Like their counterparts in America, China's suppliers feel the pain of a slumping US vehicle market.

Beginning in 2003, exports of Chinese auto parts to the United States averaged nearly 39 percent annual growth, peaking at $7.85 billion for 2007. But through the first 10 months of 2008, exports fell 4.6 percent from the year-ago period, according to the China Association of Automobile Manufacturers.

Jackie Chen is general manager of Tongzhou Jingcheng Machinery Co. His factory in Jiangsu's coastal Tongzhou Development Zone makes stamped metal brackets and ships 70 percent of its output to Ford Motor Co. and General Motors in the United States.

"This year has been a disaster," Chen said at the Gasgoo event. "Orders from the US have fallen 40 percent."

Of the nearly 50 other component makers operating in the Tongzhou zone at the beginning of this year, Chen reckons that one-fifth have shut down.

Yet by at least one measure, interest in China as a sourcing location is increasing.

When Gasgoo held its sourcing event a year ago, about 30 global component buyers attended. This time, there were more than 70.

GM, Ford and Chrysler LLC sent sourcing managers, as did PSA/Peugeot-Citroen. Major suppliers present included Robert Bosch GmbH, Magna International Inc., Delphi Corp., Continental AG, Lear Corp., BorgWarner Inc. and Honeywell International Inc.

Gasgoo's president, Kevin Chen, estimates that 30 percent of the buyers attending the event represented the China units of global companies that were looking for components to use in China. The rest of the attendees were sent by global sourcing divisions looking to buy components in China and ship them overseas.

Belonging to the latter category was Hanson Liu, who buys parts for Magna Intier Automotive Seating.

"Everybody's feeling the pain of the US downturn," Liu said. "We're under tremendous pressure from our customers to make savings. That's where China can help."

Getting qualified

Autocraft Industrial Ltd. was among the companies that Magna met with at the Gasgoo event. Although Autocraft produces test batches for Bosch and Lear in China, the company does not export to automakers in America.

Sales director Tom Zhang hopes that will change. At the Gasgoo event, he met with Ford, GM, Continental and Delphi.

"It takes at least a year to become a qualified supplier," Zhang says. "If we started the process now, we could be exporting to the US when the market picks up again."

Sales manager Weng Delin has similar hopes for his company, Weihai Sinsamwon Electro Wiring Systems Co. Sinsamwon exports wire harnesses to Hyundai Motor Co. and Kia Motors Corp. in South Korea, but none to automakers in the United States.

"American OEMs will not compromise quality for price," says Delin. "Only suppliers with high quality will be able to use the downturn to gain a foothold in the US."

His observation was confirmed by Echo Sun, who represents the international sourcing division of Ford.

"We spoke to 40 companies today," Sun said over dinner after the event. "Only six of them had the required capability."

From Automotive News (A Crain publication)