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ment they have been waiting for. Having stuck at Tier 2 and Tier 3 Chinese automaker Shanghai Automotive Industry Corp. (SAIC)
levels in the supply chain for years, many now have the technical agreed last year to extend their joint venture, Shanghai GKN Drive
knowhow and quality control mastery to compete for Tier 1 con- Shaft Co., for a further 50 years in order to expand and cater to
tracts directly from the automaker. automakers in China. SAIC is also General Motors’ joint venture
For the local supplier company Ruiming, the sun is rising bright partner in China.
and strong, or so it seems. “Everything I said back in 2007 has
come true,” says Steven Sung, Ruiming’s head of exports and new Technology whets Chinese appetite
business. “Ruiming is now a Tier 1 supplier to GM.” But is that a Cash rich but technologically weak compared to their global
good thing given GM’s current shatky situation? “GM is still strong. rivals, China’s local automakers and parts makers are eager to
We have forecasts for GM for July and August, 35,000 pieces in buy technological know-how as international suppliers affected by
July and August for cars in North dwindling sales in the developed
America. GM is still strong even in world put themselves and subsid-
North America, I feel. And in China We are investing in iaries up for sale.
it is even better,” says Sun enthu-
China to be close
“Now is a good time to buy tech-
siastically. nology they don’t have,” says Frank
to customers, to
Chou, vice president of business
An uncertain future
have short lead
development at The PAC group,
Does this small local supplier
have reason to be so overtly posi-
times and to
which supplies engineering and
management solutions to automak-
tive? “I think they have just be- reduce costs. ers.
come Tier 1 suppliers recently,” Chinese automaker Zhejiang
says Global Insight analyst Duan Geely Automobile Group set the
Chengwu. “They have managed to trend with its recent acquisition of
get GM to cut the larger western Australian transmission company,
supplier out of the supply chain DSI. DSI entered bankruptcy pro-
---so it’s a big thing for them,” ex- ceedings in mid Februarydue to its
plains Duan.
Everything I said
main customers SsangYong Motor
But who is Ruiming cutting out
of the supply chain? “No one,”
back in 2007
Co., Ford Motor Co., and Chrysler
LLC significantly reducing orders.
says Sun. “Our order as a Tier 1
has come true.
“Geely needs automatic transmis-
supplier for GM is for new busi-
Ruiming is now a
sions,” says a Geely source involved
ness, for GM in India.” New proj- in the negotiations, “so it works well
ects in the emerging world bode
Tier 1 supplier to
for them to acquire DSI.” In Austra-
well for Asia. But large Western
lia, DSI covers a total plant area of
conglomerates are taking heed. 36,000 square meters, and has an
With joint ventures or WOFE’s in annual output capacity of 180,000
China, international supplier firms automatic transmissions. The ac-
are not going to let smaller firms edge them out. quisition will help Geely by reducing the automakers need to buy
Swedish supplier SKF Group’s China president, Magnus Johans- from Tier 1 suppliers.
son, sums up why they are quickly localizing production here: “We “Through the acquisition, Geely can enhance its R&D as well
are investing in China to be close to customers, to have short lead as production abilities on automatic transmissions and can also
times, and to reduce costs.” In North America, global auto parts expand the transmission product line-up,” says Geely.
maker GKN Plc., closed down plants as orders from its North For local automakers, now is the time to buy technology and
American automotive customers dwindled. As car sales in North assets , but not the time to buy an entire foreign automaker, says
America took a harsh nose dive, supplier firms rapidly closed PAC Group’s Chou. “Buying an automaker at the moment is too
plants. difficult to run,” says Chou. How well Chinese heavy machinery
So things in Asia are not quite as bleak as they could be. “While manufacturer Sichuan Tengzhong Heavy Industrial Machinery suc-
everybody here is sorry that GM went into Chapter 11, China ceeds with its Hummer revival, is a test case a
seems to be a harbor in the storm. Contrasting the big downturn lot of eyes will be focused on.
for GM in the US, Shanghai GM, for example, increased 50% in
the first 4 months in comparison to the same period last year. Our
order book slowed down a little bit, but on the whole our China Namrita Chow has lived in China for close to 6
market is healthy,” says Haixiang Wang, GKN Group’s chief repre-
years, specializing in the automotive industry. She
sentative in China and business development director. GKN and
also writes for Automotive News and Tire Business. JULY/AUGUST 2009 37
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