Tim Solso is one of the American entrepreneurs who realized the potential of the Chinese market earlier. As Cummins Chairman and Chief Executive Officer, in 2005 he decided to move the company's global board of directors to China for the first time. Today, Cummins has enjoyed more sweetness in the Chinese market than any other region. It has become its largest and fastest-growing overseas market.
Turning over the financial statements of major companies in 2006, it is easy for people to feel the sighs of North American cars. Among the most distressing of these days, they are auto parts suppliers in the market. However, not all suppliers are in mishap, and those companies that have earlier moved market centers to China and other Asia-Pacific markets have mostly achieved ideal returns.
The thriving Chinese market has saved many suppliers of auto parts.
Rely on China "out of color"
"Although Delphi filed for bankruptcy protection in the North American market, in the Chinese market, they are definitely a winner." This was an opinion of an executive from a foreign car company when the "Financial Times" interviewed.
At present, the world’s second-largest auto parts supplier is facing difficulties in North America and has to undergo corporate restructuring and business adjustment. However, its development momentum in China is very rapid. This makes Delphi Asia Pacific and China President Quan Zhaze dare to promise: "We are confident that we will continue to maintain our leading position and growth in China and continue to support growth in the entire region."
Kang Aide, president of auto parts giant TRW Asia Pacific, calculated for the reporter that the company’s business has shrunk drastically in the North American market, but overall it has achieved growth of more than 4%. This deficit was offset by Asia-Pacific region. China is again the focus of the Asia-Pacific region and its growth rate is far greater than 4%.
The same is true of another giant Eaton. 40% of the company’s business is through mergers and acquisitions, and recent mergers and acquisitions are in the Asia Pacific region, including China. The “Financial Times†reporter learned from the senior management of the company that during the 13 years, the company had established 15 companies in China, with an average of more than one each year.
In the midst of soaring costs and falling product prices, U.S. suppliers are increasingly targeting the fast-growing Chinese market. The CEO of a giant of parts and components told the Financial Times that “North America is raining, but China is sunny.â€
Behind the localization complex
The reporters who first participated in Cummins’ China activities are often surprised by the company's "China Complex." The blonde foreigners, who speak fluent Chinese, have each played an implied Chinese name, whether or not they are responsible for China.
After understanding the company's impressive performance in China, people are no longer surprised by this phenomenon. It is with in-depth understanding of the Chinese market and integration with Chinese culture that Cummins has made a formidable gain in China: sales exceeded US$1 billion for three consecutive years.
For some Chinese enterprises that are eager for quick success, some multinational companies are difficult to understand. At a recent media meeting held by Eaton and Tianhe, reporters asked the same question: “Since I have been investing in China for many years, why did I not make great appearances until today?â€
Answer by Eaton President Carter may best explain this question. In an interview with the Financial Times, he said that China is a relatively unfamiliar market for foreign companies like Eaton. In order to better serve users, these years have been in-depth research and understanding of the Chinese market.
For many Western companies, China's difference is not only in its mysterious Oriental culture, but also in this amazing expansion of the automotive market. The annual growth rate of 1 million vehicles is not a small number of suppliers. In addition, global automobile companies all set up plants in China. Failure to follow up in time means that these large customers who have cooperated for many years must be lost.
Future Supply Chain Center
In previous years, auto parts suppliers once swarmed to Southeast Asia and hurriedly built their Asia Pacific headquarters in Singapore or other countries. Now, these giants have also moved their Asia-Pacific headquarters or R&D centers to China in the same way as ants rushed in.
China's autonomous car brands have become new businesses that these suppliers are keen on. Shen Hui, president of BorgWarner China, said that after the company's full involvement in the Chinese market, the company's business development in China relied mainly on its own brands. Currently, there are many cooperations with Chery, Geely, SAIC, and SAIC.
Of course, the production of auto parts in China does not mean that it only supplies the Chinese market. Many suppliers have already made a wishful calculation: Compared with other regions, China's cost advantage is obvious. Supplying products produced here to European and American markets can greatly reduce costs and meet market demands.
For this reason, many companies have closed factories in North America and moved the entire production line to China. Ten years ago, TRW began to implement this "overall migration" strategy. Today, the parts of the safety system and braking system that they produce in China have been exported to other countries. The company’s top executives believe that the future of China will become one of the global automotive supply chain centers.
Cummins: China's largest overseas market
Cummins Corp. announced its 2006 corporate financial report a few days ago. Its sales and profits have reached new highs, maintaining rapid growth for three consecutive years. Its international business accounts for 50% of total sales for the second consecutive year.
In the past year, Cummins’ annual sales reached a record high of US$ 11.36 billion, an increase of 15% from US$9.92 billion in 2005; EBITDA also surged by 30 percentage points from RMB 907 million in 2005 to 1.18 billion. U.S. dollar (equivalent to 10.4% of sales); annual net income of 715 million U.S. dollars, an increase of 30% over the previous year.
Among Cummins's international businesses, emerging markets represented by China, India and Russia perform the most. Cummins China's sales exceeded US$1 billion for the third consecutive year, and several major projects have made good progress. Currently, Cummins has more than 20 institutions in China, including 10 wholly-owned and joint ventures, producing engines, generator sets, alternators, filters, turbochargers and exhaust systems. China has become the world’s largest and fastest growing overseas market.
TRW: Exceeding expectations due to re-weighted operating performance
The world’s leading provider of automotive active and passive safety systems, TRW Automotive Group, recently announced fourth-quarter and full-year financial results for 2006. Its annual sales for 2006 were 13.1 billion U.S. dollars, an increase of 4 percentage points from the previous year, and a net surplus of 176 million U.S. dollars.
According to John Plant, president and chief executive officer of TRW Automotive, the company resisted the pressure from North American automakers' market share reduction and raw material price increases. The annual financial results exceeded the previous year's expectations, mainly due to the reduction in reorganization costs. And it is related to good net operating performance and initiatives.
Tianhe is one of the top ten auto parts suppliers in the world. Its Asia Pacific headquarters and Asia Pacific Technology Center are located in Shanghai. Currently, there are 15 operating agencies in China, of which 10 are manufacturing companies. The domestic supply includes the chassis system and the steering And suspension systems, safety electronics, safety belts, airbags, and electronic stability control systems, engine components and other core products.
BorgWarner: Additional Euro-Asian Investment for Growth
BorgWarner has announced that despite the company’s challenges in North America, its fourth quarter and full-year reports show that European and Asian performance has steadily increased. In the fourth quarter of 2006, sales increased by 14.7% over the same period of the previous year, with annual sales of approximately US$4.6 billion, an increase of 6.8% over the same period of the previous year.
Tim Manganello, chairman and chief executive of BorgWarner, stated that in 2006, the company made a strategic reorganization for the reduction of North American business and continued to invest in Europe and Asia with strong growth performance, resulting in a 3% decline in North American vehicle production. With the growth of 3% of the world's auto production, sales continued to grow. This is thanks to the strategy of technology-driven growth and the diversified customer and business regions.
BorgWarner is a Fortune Global 500 company that provides related parts and components for vehicle powertrain applications. It has 63 manufacturing and technology bases in 18 countries.
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