Fast Lane

Traveling to mainland China pretty regularly since 1987, I’ve witnessed first hand the astounding growth of China’s manufacturing industries.

The explosive growth really got legs after the Chinese government targeted the automotive sector in the early 1990s as the fastest and surest way to build a comprehensive manufacturing infrastructure. In only a decade, most of that has come to pass.

Today virtually all major OEMs have made major commitments and are investing at an ever increasing rate to solidify their position in what could very well be the largest automotive market in the world by 2020.

China was the main subject of discussion at the recent 2003 Tokyo International Automotive Conference, which preceded the opening of the 37th Tokyo Motor Show. The only concern in China is the undervalued currency.

Initially foreign investors tried to lead with older technology but quickly found that the Chinese only accepted cutting edge products and processes for their joint ventures and that is what everyone is delivering today. With some 70,000 engineers graduating every year in China, there is a more than adequate supply of inexpensive talent to meet technical challenge at any level. Companies, particularly suppliers, also quickly recognized that if they were going to export from China to other markets, then the technology would simply have to be world class.

“World class quality is not an option, said David Wohleen, president of electrical, electronic, safety and interior systems, Delphi Corporation, “it is a requirement.”

Wohleen indicates that China does offer a comprehensive package of localized skills and engineering. He says that while Delphi is certainly interested in global exports from China, its main interest is in serving the “depth” of the domestic market.

As an index to China’s technical acumen, Delphi claims to be the only Chinese producer of complete engine management systems. And the quality is right up to snuff. Wohleen says that Delphi’s average reject rate is at 60 ppm for all products produced in China and at 0 ppm with some.

During the Tokyo Auto Show, I spoke with Masayoshi Matsumoto, senior managing director, Sumitomo Electric Industries, who explained Sumitomo’s plan to become the leading automotive wire harness producer in the world. It is currently ranked third behind Yazaki and Delphi, with a 15 percent world market share.

To achieve lowest cost leverage, Sumitomo has shifted 100 percent of its European production to Central Europe and 100 percent of its North American production to Mexico.

Matsumoto sees great potential in China, Southeast Asia, East Asia and India, but particularly China. He told us, “Our total cost in China, even factoring in logistics, is lower than in Mexico and the quality is better.”