Shanghai, China -- North American automakers and suppliers buying parts in China forecast serious shortfalls in their purchasing goals, says the PAC Group consultancy.
The Chinese auto industry has a shortage of local companies that can meet quality demands at a low price.
"The savings expectations are not being met by the pool of suppliers they have been going to," says Gene Slusiewicz, PAC's manager of supplier quality and global sourcing in Shanghai.
The PAC Group, a global consultancy, surveyed the top three automakers and several multinational suppliers in North America to arrive at those figures. It did not name the companies. In 2007, the top three automakers in North America based on sales were General Motors, Toyota Motor Corp., and Ford Motor Co.
The PAC study findings:
-- In 2008, the three automakers will source $8 billion less in components from China than they originally forecast. Suppliers will source $4 billion less.
-- By 2010, the automakers will face a shortfall of $16 billion, and suppliers of $7 billion.
General Motors executives acknowledge that sourcing from China will not meet their original rosy estimates. In 2004, GM said parts purchased from China would equal $10 billion by 2009, including parts for its China and worldwide operations.
But in January of this year, Kevin Wale, president of GM China Group, said, "I don't know how much more (China sourcing) will grow. It will not show the relative explosive growth [it has] over the last two years."
He declined to say how much GM had sourced in China for export in 2007. "Bo (Andersson, GM's global purchasing chief) won't let me say," Wale joked.
A shortage of qualified domestic Chinese companies is the root of the sourcing shortfall by the top North American companies, says the PAC study. Also, prices at domestic suppliers who can meet international standards have risen in China due to rising labor and raw material costs. A weakening dollar has also raised prices for exported parts.
Meanwhile, business with local brands such as Chery Automobile Co. has grown explosively. The local automakers have lower quality requirements and allow suppliers a larger profit margin, says the PAC report.
"As a result, many Chinese (suppliers) are not interested in low volume or export programs with multinational companies," the report says.
The reluctance to strive for exports is not true for every level of Chinese suppliers, however.
Plenty of smaller, tier three and four Chinese suppliers are still looking for export opportunities, says Matthew Li, director of the China sourcing office for Borg Warner Inc.
Foreign companies typically pay on time, so the risks are lower than in supplying domestic companies, says Li. Supplying multinational companies also gives small companies a chance to upgrade their technology and improve their production process, he says.
And, supplying a big multinational company is good for a small Chinese company's image, says Li.
Slusiewicz acknowledges that smaller suppliers are still enthusiastic about exporting. But he adds: "A lot of them are aftermarket and hope to break into the OEM market. But there is still a big gap between the aftermarket and OEM."
[Source : Automotive News China]
The Chinese auto industry has a shortage of local companies that can meet quality demands at a low price.
"The savings expectations are not being met by the pool of suppliers they have been going to," says Gene Slusiewicz, PAC's manager of supplier quality and global sourcing in Shanghai.
The PAC Group, a global consultancy, surveyed the top three automakers and several multinational suppliers in North America to arrive at those figures. It did not name the companies. In 2007, the top three automakers in North America based on sales were General Motors, Toyota Motor Corp., and Ford Motor Co.
The PAC study findings:
-- In 2008, the three automakers will source $8 billion less in components from China than they originally forecast. Suppliers will source $4 billion less.
-- By 2010, the automakers will face a shortfall of $16 billion, and suppliers of $7 billion.
General Motors executives acknowledge that sourcing from China will not meet their original rosy estimates. In 2004, GM said parts purchased from China would equal $10 billion by 2009, including parts for its China and worldwide operations.
But in January of this year, Kevin Wale, president of GM China Group, said, "I don't know how much more (China sourcing) will grow. It will not show the relative explosive growth [it has] over the last two years."
He declined to say how much GM had sourced in China for export in 2007. "Bo (Andersson, GM's global purchasing chief) won't let me say," Wale joked.
A shortage of qualified domestic Chinese companies is the root of the sourcing shortfall by the top North American companies, says the PAC study. Also, prices at domestic suppliers who can meet international standards have risen in China due to rising labor and raw material costs. A weakening dollar has also raised prices for exported parts.
Meanwhile, business with local brands such as Chery Automobile Co. has grown explosively. The local automakers have lower quality requirements and allow suppliers a larger profit margin, says the PAC report.
"As a result, many Chinese (suppliers) are not interested in low volume or export programs with multinational companies," the report says.
The reluctance to strive for exports is not true for every level of Chinese suppliers, however.
Plenty of smaller, tier three and four Chinese suppliers are still looking for export opportunities, says Matthew Li, director of the China sourcing office for Borg Warner Inc.
Foreign companies typically pay on time, so the risks are lower than in supplying domestic companies, says Li. Supplying multinational companies also gives small companies a chance to upgrade their technology and improve their production process, he says.
And, supplying a big multinational company is good for a small Chinese company's image, says Li.
Slusiewicz acknowledges that smaller suppliers are still enthusiastic about exporting. But he adds: "A lot of them are aftermarket and hope to break into the OEM market. But there is still a big gap between the aftermarket and OEM."
[Source : Automotive News China]
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