GAAS UPDATEGlobalization Can Be An Opportunity, Not A Threat
DEARBORN, MI - To successfully compete with China and India, you must first dispense with the notion that either country is the "enemy." Our businesses must not run to Congress and turn to political means to stay ahead in today's global marketplace, said W. Michael Cox, senior vice president and chief economist of the Federal Reserve Bank of Dallas, who spoke about China and India at the 2006 Global Automotive Aftermarket Symposium (GAAS), held last month. "It doesn't work," he said. "It's actually why Japan is in decline right now. They tried to solve the problem of competitiveness with imposing all kinds of restraints on their own industry and tried to stop change. You cannot stop change because the rest of the world is going to move on." The globalization trend was a key topic at this year's GAAS, with presenters sharing their opinions on global growth, possible threats and outsourcing options. The United States will continue to face global competition for many years, so Cox stressed that the solution to this competition is for the U.S. workforce to emphasize its imagination and creativity, which are keys to innovation. Additionally, developing our people skills is another competitive advantage. "I believe the problem is not that we're outsourcing too many jobs in America," said Cox, who added the problem is we're not creating enough global entrepreneurs. "The new competitors are not your neighbors down the street but your neighbors in India and China." Jos? Maria Alapont, chairman, president and CEO of Federal-Mogul, agreed that we must be a global industry to survive. Consumers are more knowledgeable than ever before. "We can't design vehicles for just one type of customer," and that's where the global marketplace comes into play. During his presentation "The Drive for Global Profitable Growth," Alapont explained that by 2015, China will have half of the middle-income consumers in the world: "It's going to be the largest consumer market in the world, and not in 100 years, but in five to10 years." Designing, developing and manufacturing vehicles and components for these customers are crucial. The global automotive aftermarket will be producing and selling 76 million vehicles by 2010. The challenging news is that 89 percent of those vehicles - 60 million - go to emerging countries, such as India and China. "Worldwide production of vehicles in best-cost countries will be more than 50 percent," said Alapont. "That is reality. If you put all the global worldwide statistics together, the good news is that the market will go up to 76 million in only five years, but the challenging news for some is that five top manufacturers will grow their market share 14 percentage points. And another five will lose 9 percentage points. The good news for the first ones is that in the next five years they are going to grow 32 percent in volume. The not-so-good news for the others is that they will grow only 7 percent. The reality is the transportation market is growing, but only the best ones, only the global ones, will succeed and survive." Distribution perspectives A distribution panel at the symposium noted that the distribution channel must be aware of outsourcing and know how to benefit from it. Some panelists said they would remain loyal to domestic product lines, as long as suppliers do not devalue or commoditize their brands. If manufacturers decide to outsource to Asia, however, distributors said they would follow along as well. "I think as distributors, the market drives us where we're going to buy things from," said Mike Schultz, co-president of Federated Auto Parts, who added that the quality of offshore-sourced product is becoming more acceptable. "There have been some beautiful brands you don't hear about any more or very little about," said Rollie Olson, CEO of Parts Depot. "Moog has done lots and lots of work at the street level. [It's] a brand that's worth paying a premium for." Though global sourcing is not a "panacea," said Robert Blair, president of CARQUEST, who's also executive vice president of product for General Parts, "we have to be aware of it; we have to understand what the costs are and look at the true benefit to attain the benefits of global sourcing." Said Schultz: "We obviously are still a supporter of brands. If our U.S. suppliers today would come in and say we want all your business, we want to do this, we'd sign up tomorrow. The case and the reality is it hasn't happened yet." But some manufacturers are suffering from self-inflicted wounds, noted Olson. "A lot of it had to do with the leadership of that company," he said. "We are very concerned about the health of our suppliers." "There are global suppliers who are very, very effective and there are some who are marginalized because they may have backed the wrong pony," Blair said.
DEARBORN, MI - To successfully compete with China and India, you must first dispense with the notion that either country is the "enemy." Our businesses must not run to Congress and turn to political means to stay ahead in today's global marketplace, said W. Michael Cox, senior vice president and chief economist of the Federal Reserve Bank of Dallas, who spoke about China and India at the 2006 Global Automotive Aftermarket Symposium (GAAS), held last month. "It doesn't work," he said. "It's actually why Japan is in decline right now. They tried to solve the problem of competitiveness with imposing all kinds of restraints on their own industry and tried to stop change. You cannot stop change because the rest of the world is going to move on." The globalization trend was a key topic at this year's GAAS, with presenters sharing their opinions on global growth, possible threats and outsourcing options. The United States will continue to face global competition for many years, so Cox stressed that the solution to this competition is for the U.S. workforce to emphasize its imagination and creativity, which are keys to innovation. Additionally, developing our people skills is another competitive advantage. "I believe the problem is not that we're outsourcing too many jobs in America," said Cox, who added the problem is we're not creating enough global entrepreneurs. "The new competitors are not your neighbors down the street but your neighbors in India and China." Jos? Maria Alapont, chairman, president and CEO of Federal-Mogul, agreed that we must be a global industry to survive. Consumers are more knowledgeable than ever before. "We can't design vehicles for just one type of customer," and that's where the global marketplace comes into play. During his presentation "The Drive for Global Profitable Growth," Alapont explained that by 2015, China will have half of the middle-income consumers in the world: "It's going to be the largest consumer market in the world, and not in 100 years, but in five to10 years." Designing, developing and manufacturing vehicles and components for these customers are crucial. The global automotive aftermarket will be producing and selling 76 million vehicles by 2010. The challenging news is that 89 percent of those vehicles - 60 million - go to emerging countries, such as India and China. "Worldwide production of vehicles in best-cost countries will be more than 50 percent," said Alapont. "That is reality. If you put all the global worldwide statistics together, the good news is that the market will go up to 76 million in only five years, but the challenging news for some is that five top manufacturers will grow their market share 14 percentage points. And another five will lose 9 percentage points. The good news for the first ones is that in the next five years they are going to grow 32 percent in volume. The not-so-good news for the others is that they will grow only 7 percent. The reality is the transportation market is growing, but only the best ones, only the global ones, will succeed and survive." Distribution perspectives A distribution panel at the symposium noted that the distribution channel must be aware of outsourcing and know how to benefit from it. Some panelists said they would remain loyal to domestic product lines, as long as suppliers do not devalue or commoditize their brands. If manufacturers decide to outsource to Asia, however, distributors said they would follow along as well. "I think as distributors, the market drives us where we're going to buy things from," said Mike Schultz, co-president of Federated Auto Parts, who added that the quality of offshore-sourced product is becoming more acceptable. "There have been some beautiful brands you don't hear about any more or very little about," said Rollie Olson, CEO of Parts Depot. "Moog has done lots and lots of work at the street level. [It's] a brand that's worth paying a premium for." Though global sourcing is not a "panacea," said Robert Blair, president of CARQUEST, who's also executive vice president of product for General Parts, "we have to be aware of it; we have to understand what the costs are and look at the true benefit to attain the benefits of global sourcing." Said Schultz: "We obviously are still a supporter of brands. If our U.S. suppliers today would come in and say we want all your business, we want to do this, we'd sign up tomorrow. The case and the reality is it hasn't happened yet." But some manufacturers are suffering from self-inflicted wounds, noted Olson. "A lot of it had to do with the leadership of that company," he said. "We are very concerned about the health of our suppliers." "There are global suppliers who are very, very effective and there are some who are marginalized because they may have backed the wrong pony," Blair said.
