posted 02-13-2004 01:10 PM            

Surge in imports by GM, others is seen as a threat to jobs in U.S.

February 12, 2004

BY JEFFREY MCCRACKEN
DETROIT FREE PRESS BUSINESS WRITER

During the next few years, auto imports from China -- for parts like radios, CD players or DVDs -- are expected to explode. So, too, is the number of workers employed in China by Detroit's automakers and suppliers.

Looking at Detroit's three automakers and largest parts suppliers, it's clear that the politically sensitive drive by U.S. corporations to import more goods from China will only grow.

The biggest push appears to be from General Motors Corp., which plans to increase 20-fold the number of auto parts it buys from China and uses in the United States, Europe, Mexico and elsewhere. In 2003, GM bought about $200 million in Chinese auto parts for use in the rest of the world. Its top purchasing executive expects that to grow to $4 billion by 2009.

Currently, GM brings more auto parts into China than it exports, but that will change rapidly during the next few years.

GM, the world's largest automaker, will more than double the number of parts it buys in China for cars it makes there, going from $2.8 billion for Chinese parts for China to $6 billion annually.

"The Chinese marketplace of suppliers is growing," Bo Andersson, GM vice president of worldwide purchasing, said in an interview last month. "Our largest electronics supplier is in China. Our focus is on being ready for China, but we will also export more in the future."

A move to import more from China helps the bottom line for GM and other corporations, because of China's lower wages, lower energy costs, sparse environmental regulations and the currency advantages of making a product in China and shipping it to the United States. GM and other U.S. automakers face intense price competition from foreign automakers that make cars and trucks in the United States and abroad, usually paying lower wages and providing fewer benefits.

Nonetheless, the combination of a $104-billion U.S. manufacturing trade imbalance with China, the loss of 2.6 million U.S. manufacturing jobs since 2001 and a coming presidential election make any talk of goods exported from China to the United States a touchy subject.

"This kind of thing is catastrophic. It's very disheartening when big manufacturers in this country decide to buy more parts from China because it just kills all of us mom-and-pop manufacturers who can't pick up and move there," said Gerald Flannery, president of the Michigan Tooling Association. He owns a Detroit gauge-maker with 30 workers.

Flannery was in Washington, D.C., on Wednesday with other manufacturers berating House members about China and the loss of manufacturing jobs. Flannery met with Michigan Republicans Candice Miller, Mike Rogers and Thaddeus McCotter.

"China is becoming a huge election-year issue. It's erupting at the grassroots level among manufacturers. When a company like GM buys billions from China, as far as I'm concerned, they're deciding to put billions in their economy and not ours," Flannery said.

Concern about the move of U.S. jobs overseas was a topic all day in the Capitol. Federal Reserve Chairman Alan Greenspan testified that he expects job growth, while Democrats decried a White House report that outsourcing of jobs to lower-wage workers in other countries could help the U.S. economy.

The issue of jobs and work going overseas is so sensitive that every night, CNN runs a feature called "Exporting America" that looks at U.S. companies "sending jobs overseas or choosing to employ cheap overseas labor."

A recent Automotive News article first detailed GM's push to purchase more parts from China. The topic has sparked criticism and concern within GM and from small U.S. auto-parts suppliers.

Smaller manufacturers "are absolutely terrified" by China, said Frank Vargo, vice president of international economic affairs at the National Association of Manufacturers.

"They are import-competing firms, and they're terrified their manufacturing customers will move to China or buy more parts from China," said Vargo.

"China is all we hear about from small manufacturers. If jobs are a big issue at the election, trade with China may resonate as a big issue," said Vargo, whose group, based in Washington, represents 14,000 companies.

Auto sales within China are exploding, jumping 30 percent through the first nine months of 2003, and China has passed Germany as the third-largest auto-sales market, behind the United States and Japan. GM's auto sales in China jumped 46.4 percent in 2003.

China, with nearly 1.3 billion people, is expected to emerge as the world's largest market for consumer goods in coming years.
What other automakers do

As part of its strategy to keep down auto prices, GM is asking suppliers for "global pricing," which GM suppliers called code for buying parts from China. GM is one of the world's largest buyers of parts and materials, spending $83 billion in 2003, including $61 billion in North America.

"I expect our suppliers to buy where they can buy best, whether that is northern Michigan, South Carolina or somewhere else," said GM's Andersson. "We have asked our tier-one suppliers to look at the global marketplace for parts. I expect that from them."

Ford Motor Co., meanwhile, has doubled its purchases from what it calls "low-cost countries" like China, India and South Korea. The number grew from less than $500 million a year to about $1 billion in 2003, said spokesman Paul Wood.

Ford spends about $70 billion a year on parts and materials, including $50 billion from domestic sources.

DaimlerChrysler Corp. did not have specifics on its plans to buy more auto parts from China, but said the amount will grow.

"We do expect that our purchases in China will grow on a level similar to other worldwide auto manufacturers," said Chrysler spokesman Mike Aberlich.
Jobs go overseas, too

Much of the growth of an auto-parts industry in China is coming from U.S.-based suppliers such as Delphi Corp. The Troy maker of products ranging from steering systems to electrical parts is the world's largest auto supplier.

In 1993, it had about nine employees in China. Today, it has about 7,000. It's the largest foreign auto supplier in China. Delphi's revenue from China grew 50 percent to about $650 million in 2003.

The amount Delphi brought from China to the United States, Europe and elsewhere grew from about $65 million in 2002 to about $95 million in 2003.

As Delphi's China arm grows, its U.S. employee base is shrinking. In October, it announced plans to cut 500 U.S. salaried jobs and 3,000 hourly jobs.

Southfield-based Lear Corp., one of the largest makers of auto interior parts such as seats, is also growing in China, though it says much of that growth is to meet increased demand in China.

Lear had 1,950 employees in China at the end of 2003, up from about 1,220 employees in 2002.

Other large suppliers such as Visteon Corp. are also expanding into China, both to make parts for Chinese vehicles and to export to the rest of the world.

"It's just part of doing business for billion-dollar suppliers," said Neil DeKoker, president of the Original Equipment Suppliers Association, which represents 350 suppliers. "They have to be there or else they give up business to competitors. But there is a fallout with small manufacturers when the automakers buy parts from China. The small suppliers have difficulty moving to southern Alabama, let alone China," he said.
A problem for Mexico

Ironically, any expansion of auto parts exported from China to the United States and the rest of the world also threatens the last country to worry many American manufacturers -- Mexico.

"China is a huge, looming threat to Mexican auto jobs. Parts can be made in China and shipped to Mexico pretty easily, and the cost savings . . . are just enormous," said Rebecca Lindland, senior market analyst at Global Insight, an economic-research firm.

"Of course, China is also a real threat to auto jobs here in the United States. I mean, how can companies compete with 50-cent wages?" she asked.

posted 02-14-2004 08:28 AM            

At a recent computer expo (COMDEX), Bill Gates reportedly compared the computer industry with the auto industry and stated, "If GM had kept up with technology like the computer industry has, we would all be driving $25.00cars that got 1,000 miles to the gallon".

In response to Bill's comments, General Motors issued a press release stating:

If GM had developed technology like Microsoft, we would all be driving cars with the following characteristics (and I just love this part):

1. For no reason whatsoever, your car would crash twice a day.

2. Every time they repainted the lines in the road, you would have to buy a new car.

3. Occasionally your car would die on the freeway for no reason. You would have to pull over to the side of the road, close all of the windows, shut off the car, restart it, and reopen the windows before you could continue. For some reason you would simply accept this.

4. Occasionally, executing a manoeuvre such as a left turn would cause your car to shut down and refuse to restart, in which case you would have to reinstall the engine.

5. Macintosh would make a car that was powered by the sun, was reliable, five times as fast and twice as easy to drive - but would run on only five percent of the roads.

6. The oil, water temperature, anda lternator warning lights would all be replaced by a single "This Car Has Performed An Illegal Operation "warning light.

7. The airbag system would ask "Are you sure?" before deploying.

8. Occasionally, for no reason whatsoever, your car would lock you out and refuse to let you in until you simultaneously lifted the doorhandle, turned the key and grabbed hold of the radio antenna.

9. Every time a new car was introduced car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.

10.You'd have to press the "Start" button to turn the engine off.

TEE HEE !

posted 02-14-2004 12:28 PM            

5. Macintosh would make a car that was powered by the sun, was reliable, five times as fast and twice as easy to drive - but would run on only five percent of the roads.