Transplant suppliers surge in N.A.

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From this weeks Automotive News:

 

Transplant suppliers surge in N.A.

Acquisitions, sales to foreign automakers fuel growth

 

By Lindsay Chappell

Automotive News / November 28, 2005

 

When Asian automakers such as Toyota expand in North America, suppliers like Denso and Aisin aren't far behind.

 

When European companies like Siemens VDO Automotive want business in the United States, they make acquisitions.

 

As the import-brand automakers gain market share in North America, their foreign-based suppliers are gaining share on U.S. and Canadian rivals.

 

In 2004, foreign-based suppliers produced 33.1 percent of original-equipment parts sold in North America, up from 27.5 percent in 2001.

 

Those figures are derived from Automotive News' annual list of the Top 150 suppliers to the North American auto industry. They include the value of imported components as well as parts made by transplant factories in North America.

 

The biggest reason for the upsurge? The import brands produced 4.9 million vehicles in North America in 2004, up from 3.8 million five years earlier.

 

At the same time, the Big 3 automakers are buying more components from Asian and European suppliers. The market shift has had a profound effect on suppliers' growth prospects.

 

Since 2001, foreign suppliers in the Top 150 list have increased North American sales by 44.7 percent.

 

During that same period, combined sales of the largest North American suppliers grew only 11.3 percent.

 

North American suppliers aren't sitting still. As General Motors and Ford Motor Co. lost U.S. market share, their traditional suppliers are going after more business where the growth resides - the transplants.

 

In October, for example, ArvinMeritor Inc. opened a door module plant in Montgomery, Ala., to supply the profitable and fast-growing Korean automaker Hyundai Motor Co.

 

Unwanted attention

 

The growth of import-brand suppliers reflects two different approaches to the North American parts market. Japanese-based suppliers are growing here because their fortunes are pegged to traditional customers like Toyota and Honda, which are growing fast.

 

Meanwhile, European suppliers are expanding by purchasing U.S. companies. German tire maker Continental AG owns what used to be ITT Automotive's U.S. brake and chassis business. France's Valeo SA owns what was known as ITT Electrical Systems.

 

Siemens VDO, one of the fastest-growing German suppliers in North America, last year acquired the Chrysler group's electronics manufacturing operations in Huntsville, Ala.

 

Overnight, the purchase gave Siemens VDO 25 percent share of North American original-equipment audio systems, up from zero in 2003. It also doubled the company's share in body controllers and quadrupled market share of instrument clusters.

 

Siemens VDO expects Huntsville will gain other customers here in the future.

 

"Huntsville has already allowed us to land two new customers - one European and one North American," says Siemens VDO spokesman David Ladd. "Right now we're very close to being awarded business with another one."

 

Gaining Big 3 business

 

Foreign suppliers also are gaining business from the Big 3. Denso Corp. of Japan, the world's No. 4 auto supplier in 2004, reports that its sales to each of the Big 3 are rising. Denso, Toyota's partially owned supplier of air conditioners and electronics, has seen total North American sales rise from $3.72 billion in 2001 to $4.32 billion last year.

 

"Ford and Chrysler are some of our largest customers," says Terry Helgesen, senior vice president for marketing at Denso. "The Big 3 represent 40 to 45 percent of our business in North America now."

 

The Chrysler group uses high-output alternators across its product line that are made by Denso in Maryville, Tenn., Helgesen says. The past five years have seen Denso's thermal systems catch on with GM.

 

Over the past two months, Ford Motor Co. has begun compiling a list of 100 suppliers that will supply parts globally to Ford. Of the first 12 companies named, five are European or Japanese. They are Autoliv Inc., Hella KG Hueck & Co., Getrag Group, Yazaki North America Inc. and Foster Electric Co. Ltd.

 

But the true engine of North American growth for Asian suppliers remains the transplant automakers. This year, Toyota will build nearly 1.2 million vehicles in North America. To support that production, the company will purchase parts and raw materials worth $25 billion, up from $15 billion in 2000. Japanese companies and U.S.-Japanese joint ventures will provide most of those parts.

 

Aisin World Corp. of America, also partially owned by Toyota, is constructing a $67 million plant in Clinton, Tenn., that will supply a new Toyota program with engine castings next year. In October, the company opened a test track about 60 miles northwest of Detroit.

 

Over the past four years, Aisin's North American sales have risen from $761 million to more than $2.4 billion. Those volumes will grow larger as Asian brands gain market share, says Paul Haelterman, market assessment director at CSM Worldwide, a Farmington Hills, Mich., forecasting firm.

 

CSM predicts import brand vehicles will gain 10 percentage points of market share by decade's end. Haelterman says that means even more growth for the Asian and European suppliers that serve them.

 

"As long as they have that growth, you're going to see their suppliers grow, too," Haelterman says. "You'll see supplier jobs continue to flow to places like Tennessee and Kentucky and Alabama."

 

You may e-mail Lindsay Chappell at lchappell@crain.com

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Fastest growing foreign suppliers in North America

Dollars in millions

 

Aisin World Corp. $2,404 2004 North America OEM automotive parts sales $761 2001 North America OEM automotive parts sales 215.9% Percent change from 2001

Sumitomo Electric $1,630 2004 North America OEM automotive parts sales $543 2001 North America OEM automotive parts sales 200.2% Percent change from 2001

CalsonicKansei $1,497 2004 North America OEM automotive parts sales $616 2001 North America OEM automotive parts sales 143% Percent change from 2001

Hitachi Automotive $983 2004 North America OEM automotive parts sales $443 2001 North America OEM automotive parts sales 121.9% Percent change from 2001

Siemens VDO $2,668 North America OEM automotive parts sales $1,276 2001 North America OEM automotive parts sales 109.1% Percent change from 2001

 

Source: Automotve News Data Center

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By the numbers

* $154.39 billion: Total North American parts sales in 2001 for 100 largest suppliers

 

* $42.52 billion: Foreign companies' share in 2001

 

* $186.06 billion: Total North American parts sales in 2004 for 100 largest suppliers

 

* $61.54 billion: Foreign companies' share in 2004

Source: Automotive News