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AUTOFOCUS
n a small village in Zhejiang province, China, back in 1991
a small time spare parts entrepreneur, Ye Jin Rui, and his
friend, a local village headman Han Yu Ming, set up an alu-
minium die casting factory and called it Ruiming Group Co.
Jump a decade and a half to 2007---Ruiming entered General Mo-
tors’ supply chain, but down the ladder as a Tier 2 supplier.
In the automotive industry a Tier 1 supplier has orders directly
from the automaker. A Tier 2 supplier is commissioned by a Tier
1 supplier to produce certain parts, which the Tier 1 assembles
with other parts to supply to the automaker. A Tier 3 supplier is
further down the supply chain, and supplies a Tier 2 supplier, and
so on. All suppliers aim to be Tier 1 suppliers, so they can get the
best price for their parts and cut out the other suppliers from the
supply chain. But, for a Tier 2 or Tier 3 supplier to enter Tier 1
status is tough. Winning a Tier 1 contract means someone else
has lost potential business. And no one wants to have to close
shop as orders dwindle. Competition in quality and price is cut-
throat today, with confirmed orders the only way to survive the
GM India
global downturn.
still assessing
impact of
U.S. crisis
GM, which sourced components worth around $300-
350 million last year from India, had earlier announced
a target of $1 billion by 2010. By February, it was clear
that this target would be tough to meet. Component
makers say the extent of how badly sourcing out of In-
dia will be hit will depend on products, platforms and
markets that the new good GM retains. The bulk of In-
dia’s parts exports go to the US. But there are compo-
nent makers who supply to GM’s European operations Tier 1 dreams
as well, including Opel which is now being sold off, said Today, the small local manufacturer of metal parts, Ruiming
a GM official. Post restructuring, one will have to negoti- Group is celebrating. They are now Tier 1 suppliers to General
ate with the new owners of GM brands that are being Motors. Having invested 300 million yuan in new facilities, span-
sold off. ning 136,000 square meters in China’s Zhejiang province, they
For GM India -- which has invested over $1 billion in In- have everything to lose if their work with GM disintegrates. End-
dia to date and directly employs more than 4,000 peo- less production lines will lie empty, staff will have to be laid off,
ple at its operations at Halol, Talegaon, Bangalore and machinery will rot, and bank loans will inflate with heavy interest
Gurgaon -- the official position is that it’s business as rates and fines. Stories of bankruptcies and losses span across
usual. We have already made the required investments the automotive supplier industry: Visteon Corp, Delphi, ArvinMeri-
in India and we don’t plan to lay off a single employee,” tor, and GKN. But these are large global supplier companies with
said GM India spokesperson P Balendran. Yes, with facilities across the globe, profits pulled down by large global au-
marketing slowing down globally, our sourcing plans tomakers cutting back on orders, and running out of money to
have slowed down but that’s all. We don’t even depend pay for parts.
on Detroit for models and technology. “Harsh changes for some mean opportunities for others,” mus-
es senior analyst Duan Chengwu of Global Insight, a leading global
think tank. For smaller local supplier companies, this is the mo-
36 JULY/AUGUST 2009 www.chainaonline.com
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