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Automotive Industry

Big Opportunities in Asia - automobile industry affected in Asia - Brief Article - Statistical Data Included - Column

Automotive Industries, Dec, 2000 by Michael Robinet

The winds of globalization are blowing eastward. Stifled domestic markets, the Asian economic crisis, negative currency shifts and global OEM consolidation pressures all have adversely affected Japan and Korea's light vehicle manufacturers. In three short years, the region's vehicle manufacturing landscape has been torn asunder -- forever.

One need not outline all the new (forced) alliances to underscore the monumental changes afoot. While the sphere of influence of select Japanese OEMs has grown internationally in NAFTA, Europe, ASEAN and Mercosul, light vehicle production in Japan is not slated to eclipse 10 million units by 2005. Japanese OEMs will look to regional markets to fuel any meaningful growth.

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In Korea, CSM is forecasting continued growth at Hyundai, although Daewoo's eventual suitor and the outcome of the operations is a substantial wild card. Extending to 3.1 million light vehicle units this year, Korea could reach nearly 4 million units by 2005--fueled by an expanding domestic market and export growth. Currently, Daewoo's eventual fate is still unclear though consolidation and restructuring will certainly be part of the equation.

Several issues have and will continue to affect Japanese and Korean OEMs. Financial difficulties have plagued several manufacturers and forced consolidations to survive. Asia Motors, Kia, Mitsubishi and Nissan all succumbed to new suitors. Ford was forced to take tighter control of Mazda's operations to ensure survival. Daihatsu forged closer ties with Toyota and the GM Trio -- Isuzu, Suzuki and Fuji Heavy -- evolved. Only Honda has refrained from purchasing another OEM or swapping equity -- not part of their DNA.

The new-found partnerships have also added the ability to combine development efforts and share global platforms. Toyota and Honda have the best track record of simultaneously building mass-market offerings for separate markets based from common platforms; the savior at Mazda, Mitsubishi and Nissan will be copying this strategy. In the past, these OEMs have built common platforms in separate markets, though volumes struggled to reach 500,000 units per year. New affiliations open the door wider to increased volume possibilities and opportunities to leverage stronger economies of scale -- reducing fixed and variable costs per unit.

Several global platforms are scheduled to hit Japan's shore. Over the next three years, three global platforms will replace current lower-volume Mazda entries. In the heart of the market are Ford's B-class, C-class and C/D-class platforms.

Riding the coattails of this religion to reduce development costs, commonize tooling and increase global production flexibility are new opportunities for western suppliers. As keiretsu relationships undergo dissolution or restructuring, western suppliers, pre-sourced in global platforms, are eyeing the possibilities. Japanese OEMs will be increasingly relegated to final engineering on high volume platforms or primary source for niche products.

While Mazda is the most apparent example, look for Mitsubishi, Hyundai and Nissan to expand the use of global platforms. Japan and Korea are littered with low volume platforms (less than 50,000 units per year) that are ripe for consolidation or elimination. The GM Trio will work with the General to expand their breadth in other markets.

Displacement of current Japanese suppliers that may have limited international exposure is a real and growing possibility. It will allow western suppliers with a cost or technology edge leverage to negotiate joint ventures, manufacturing agreements or equity arrangements.

Opportunities abound for western suppliers in Japan. Understanding the lay of the land and having patience to weather years of relationship building will be the real challenge.

Automotive Industry

Big Opportunities in Asia - automobile industry affected in Asia - Brief Article - Statistical Data Included - Column

Automotive Industries, Dec, 2000 by Michael Robinet

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