Denso drives ahead: A plan to double global sales by 2005 has Japan's supplier giant thinking differently - Supplier Strategy - Denso Corp.'s sales reach $16.25 bn for fiscal year ending March 2001 - Statistical Data Included

Automotive Industries,  Feb, 2002  by Lindsay Brooke

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Watch your rearview mirror, Robert Bosch. The big supplier behind you is preparing to pass. Nearly six years ago, Hiromu Okabe became president of what was then Nippondenso Corp. He charged into his new position with an aggressive growth plan firmly in hand. It was called Denso Vision 2005, and its aim is to double sales at Japan's giant auto supplier by the '05 fiscal year.

"I started by changing the corporate name to Denso, which reflected our new vision to be a global company," Okabe recalls. "Then we set the sales target for 2005--2.7 trillion Yen ($27 billion, at a [yen]l00/dollar exchange rate)."

Okabe says Denso is on track to hit its target. Sales for the fiscal year ending March 2001 were [yen]2.01 billion, or $16.25 billion. Only Robert Bosch GmbH, Visteon Corp. and Delphi Automotive Systems Corp. are larger. Okabe believes his company will pass Bosch as the world's number-three auto supplier in the process.

The Vision 2005 strategy is to extend Denso's business deeply into overseas markets, spearheaded by new product technologies and surrounded by the company's traditional quality. Over half of last year's consolidated sales were still in Japan. That means stepping further away from Toyota Motor Corp., of which Denso was a part until going independent in 1949. Toyota remains Denso's largest customer (much like the General Motors/Delphi and Ford Motor Co./Visteon relationships) and still holds roughly 25 percent of the company's stock. Ironically, Bosch also is a Denso shareholder, with five percent.

"World Number One Share"

Denso's four primary automotive product segments are Thermal systems (34.3 percent of FY01 sales); Powertrain Controls (20 percent); Electronic systems (17.6 percent) and Electric systems (12.4 percent). Small motors, telecommunications, environmental and industrial systems -- the company is a fast-growing supplier of small robots -- comprise most of the remainder. Achieving marketshare leadership in each segment, everywhere in the world, is the driver behind Okabe's plan, which he calls World Number One Share.

"Starters, alternators, fuel pumps, air conditioners, small electric motors, instrument clusters...we now have 14 products that we have world number-one share in," he claims. For 2005 we are trying to raise that number to 25." Currently, several Denso products hold number two or three marketshare status, including Navigation systems, oxygen sensors, variable-camshaft-timing systems and windshield wiper systems. The company will focus on those product areas in the push to be market leader.

Although many of the items can be considered commodity parts, Denso's Toyota-honed production system and reputation for extremely high production quality allows the company to maintain healthy margins. "In things like starter motors, alternators and [O.sub.2] sensors, for example, Denso is the industry standard," comments a General Motors purchasing executive who prefers anonymity for this story. "Our benchmarking and warranty costs tell us they're the best. I wish I could say the same for their competitors' equipment"

Enviable PPM (said to be in the low single digits in some of its 60 major plants) helps drive the consistent quality. Over the past decade that's earned Denso plenty of Lexus business - which has been a strong calling card at other prospective customers.

"You've got to jump through hoops at Toyota to win Lexus work," asserts Greg Janicki, vice-president of Northville, Mich.-based auto industry forecasters CSM Worldwide. "When you've got it, other OEMs know you've really done your homework"

Recently Denso reorganized its sales structure to better respond to industry globalization and the World Number One Share plan. The former geographic-region-based structure is now a customer-centric set-up, serving as outlet for an wide-ranging network of 73 Denso Group companies in Japan and 78 global affiliates in 28 countries.

Okabe's global game plan has the attention of his competitors, including Delphi CEO J.T. Battenberg, who earnestly lauded his Japanese counterpart during a business conference in Tokyo last fall. "Denso is one of our toughest, most respected competitors in quality and technology;" Battenberg told Automotive Industries. "You can't take your eye off them for a second."

Japan's suppliers have known that for years, and Okabe himself is known as one of the country's sharpest CEOs. He joined Denso's accounting department in 1960, armed with an Economics degree from Nagoya University. Before his promotion to company president in 1996, he was managing director of the company's Electronics group. A voracious reader (nearly 300 books per year), he is rated as a near-professional at "Go," a popular Japanese board game.

Okabe cites new opportunities for Denso; including telematics, hybrid and fuel cell systems and even the aftermarket (service parts) segment, which he intends to build into a significant revenue source in the next five years. "Changing Denso" is a recurrent theme of Okabe's recent speeches, and many of the company opportunities will come through new "linkages" within the existing supply chain and outside as well.