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Domestic manufacturers in North America and Europe are facing even more challenges, as the high-end edge they have held now seems to be receding. As such, an increasing number of diversified manufacturers are "abandoning the U.S. automobile industry, selling off auto-related businesses and beefing up other parts of their portfolios," according to a Wall Street Journal report.
Tower Automotive, a global designer and producer of vehicle structural components and assemblies, filed for Chapter 11 protection in February 2005, citing lower production volumes, rising steel prices and a complex and unsustainable debt load. To "strengthen its financial position" and "realize opportunities for profitable, long-term future operations," the Michigan-based company implemented a sweeping restructuring during its reorganization process: it closed or sold 16 manufacturing plants and consolidated production into existing facilities to improve productivity; it negotiated settlements with all 10 United States-based labor unions; it sold non-core businesses; and it diversified its customer base with international automakers.
As a result, Tower expects more than half of the restructured company's revenue will come from its international operations."
And as of last Friday, according to a message at Delphi Corp.'s Web site:
Delphi has updated and distributed informational materials related to the sale of the Steering business to a select group of parties. Platinum Equity remains interested in the Steering business and discussions with them continue. Due to confidentiality, we cannot comment further.
This type of news is losing its shock value for those of us who follow such automotive supply and manufacturing trends.
This time last year, even mainstream news such as The Wall Street Journal (via Supply Chain Digest) were reporting rapid gains in the quality and sophistication of Chinese manufacturing that were leading to large increases in market share in the automotive parts and components industry.
Once relegated to commodity, low-value automotive parts, noted the August 2006 story, "quality has improved so much that major Western auto makers like Volkswagon and Daimler-Chrysler say they plan to buy billions of dollars of [higher end] Chinese-made components in coming years."
Now come even more challenges for domestic manufacturers in North America and Europe, as the high-end edge they have held also starts to recede.
According to The Wall Street Journal (free preview here) over the weekend, rapid improvements in Chinese manufacturing capabilities are leading to strong gains in market share in high-end automotive parts and components, putting still more pressure on struggling domestic manufacturers, and portending vigorous competition in an array of other higher end products.
"With all major foreign OEMs already producing in China, significant opportunities exist for automotive suppliers. China's automotive component market, estimated at US$46 billion (2006), is expected to become the world's largest market and production base by 2020," notes the JLJ Group (via BuyUSA.com), a provider of solutions for international companies entering or growing in China. "Currently, Chinese suppliers dominate the lower end of the market and are moving aggressively towards the mid-market."
It should come as little surprise, then, that the JLJ Group notes the best prospects for foreign automotive component manufacturers "therefore lies in the high-end product categories where technology, know-how and economies of scale can make a difference."
As such, as the WSJ over the weekend reported, "An increasing number of diversified manufacturers are abandoning the U.S. automobile industry, selling off auto-related businesses and beefing up other parts of their portfolios."
Further, according to the publication: The exposure to the domestic automotive business, battered by global competition that has already forced many auto-component-only producers such as Tower Automotive Inc. and Delphi Corp. into bankruptcy proceedings, has become too worrisome for these producers, while other parts of their businesses are more promising. That is why PPG Industries Inc., the Pittsburgh-based glass and coatings manufacturer, recently hung a "for sale" sign on its windshield business.
Pittsburgh-based PPG is a global supplier of paints, coatings, chemicals, optical products, specialty materials, glass and fiber glass. According to the company's Web site, the supplier employs more than 34,000 people and has 125 manufacturing facilities and equity affiliates in more than 25 countries. Luckily for the employees, there are other products beyond glass for autos to manufacture.
The strong momentum in China's automotive industry was very tangible at the 2007 Shanghai International Auto Show in April, where all key OEMs and suppliers, not to mention 500,000+ visitors, were present.
Little more than 10 years ago, Chery didn't exist. Today it is the largest independent Chinese auto manufacturer and one of the top five producers in China, with a hefty contract from Chrysler to export small cars to the U.S.
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