Automotive News - September 8, 2008 - (Page 20) 20 • SEPTEMBER 8, 2008 China exports squeezed Suppliers: Cheap labor, ample capacity keep nation attractive amid higher costs Steven Ribet autonews@crain.com Higher costs in China Why China production costs are rising Yuan is stronger compared with the dollar Shipping costs jumped as price of oil rose Wages rose as labor supply tightened State subsidies for exports were cut ment makers and their suppliers,” says Neumaier. “Many of our components and raw materials, you can only buy here.” Even were China to have no cost advantage, supply chains could be slow to shift. “Our customers have very stringent quality standards and testing requirements if we want to move production to another facility,” says Visteon’s Neumaier. “It’s a process that can take up to 18 months.” During this time, of course, currencies and commodities could change direction. “Oil and yuan fluctuations don’t figure much in our decisions,” says Valeo’s Marsais. “We’re more interested in China as a long-term value proposition.” Joerg Wuttke, BASF Group’s chief China representative, sums up the mood in the industry: “I don’t believe in any relocation story in the car industry due to temporarily high logistics costs. BASF will not change its tune. Nor will any other companies I’m aware of.” c SHANGHAI — The mighty auto parts export machine known as China Inc. is under strain. In the past year, the dollar has dropped 11 percent against the Chinese yuan, making Chinese goods more expensive for U.S. companies. Skyrocketing fuel costs have boosted shipping costs. Labor costs are rising. And in the summer of 2007, the government slashed state subsidies on thousands of exports. The stress is showing, although the data are mixed. The value of auto parts shipped from China to the United States dropped 4.7 percent to $3.27 billion in the first half of this year, compared with the same period of 2007. In the same period this year, exports to Europe rose 15.7 percent to $2.04 billion, says the China Association of Automotive Manufacturers. Suppliers say China is still an attractive place to source many parts because of cheap labor and abundant manufacturing capacity. Although wages are increasing, worker productivity is, too — and often at a faster rate. “The cost advantages here are still very interesting for us,” says Christian Marsais, China group vice presi- dent of Valeo SA. “We are not changing our manufacturing, sourcing or investment plans for China.” Last year the French supplier sourced more than 300 million euros ($436.3 million) of parts from China. Cheaper than Mexico “I meet regularly with my counterparts in the industry,” says Karl Neumaier, director of Asia Pacific supply chain management for Visteon Corp. “I haven’t sensed any shift.” At Valeo, Marsais acknowledges that he is reconsidering a few products. “Bulky components are looking less attractive to ship to the U.S.,” he says. “Stuff that doesn’t require much subassembly, too.” Yet even after delivery, 95 percent of components from China are still at least 15 percent cheaper than they would be if Valeo had sourced them from Mexico, Marsais says. Fifteen percent, he adds, is as a rough cutoff point. When above 15 percent, the benefits of savings made through sourcing from China easily outweigh the disadvantages of longer delivery times, such as shipping costs. Valeo’s sourcing from China should grow more than 30 percent this year, Marsais says. While fuel prices rose dramatically, the impact has been modest. According to London-based Drewry Shipping Consultants Ltd., between May 2007 and May 2008, the cost of getting a 40-foot container from south China to Los Angeles rose by a mere 10 percent to $2,400. Over the same period at Valeo, Marsais says, shipping has risen from 5 percent to just 7 percent of the total cost of obtaining less bulky parts from China. One reason for the limited effect, suggests Drewry consultant Neil Dekker, may be slack demand resulting from the U.S. slowdown. Although high, wage inflation in China — up 10 to 15 percent over the past year — has been offset by improvements in productivity. “We worked closely with our suppliers to achieve this,” says Marsais. “We’re familiar with their processes, and we can see there’s still a lot of potential for further gains.” This benefit has been shared by Visteon. “All that higher wages and currency shifts have done is drive improvements in efficiency,” says Neumaier. Study: 15% of wrecked autos got washed titles Arlena Sawyers asawyers@crain.com Electronics headquarters Moreover, China is the only place to buy many electronic parts. “Much of the world’s electronics industry has moved to China — equip- Nearly 15 percent of the 1.3 million vehicles that were severely damaged by collisions, bad weather or fire in the first half of 2008 now have clean titles that do not identify that damage, a new study concludes. More than 185,000 cars and trucks that were issued titles indicating their damage had those brands removed when the vehicles were retitled in another state, says Experian Automotive. Edie Hirenstein, senior product manager of Experian’s AutoCheck vehicle history service, said the number of title-washed vehicles in the first six months of this year was about the same as in the year-ago period. As the country enters the peak hurricane season, she says, the industry must redouble its vigilance about rebuilt flood cars and other wrecks. Experian has compiled information on 600 million cars and trucks from departments of motor vehicles in all 50 states and Washington. The study examined what happened to titlebranded vehicles when they got new titles in other states, Hirenstein said. The study did not include vehicles that were at least 10 years old. c http://www.Pick-n-ClickAds.com http://www.Pick-n-ClickAds.com
Table of Contents Feed for the Digital Edition of Automotive News - September 8, 2008 Chrysler Financial hikes dealer floorplan fees Back in business? Detroit's best bets for cash: Feds, UAW Document fee suits swamp Missouri dealers Honda's family squabble Used truck prices rebound Ford mulls Lincoln compact Toyota delays RAV4 plan Proposed flex-fuel mandate roils industry Chrysler sues consultant over sourcing Cobalt transaction prices are up $775 since April Nissan looks to Mexico for engineering aid To retain truck buyers, Nissan offers more stuff Press: Chrysler is pushing forward on electric cars Leasing falls to 4-year low GM: Currency shift stalled Astra Dealers say they can sell the Republican ticket Industry loans clash with GOP climate Grand Cherokee will get axles from new plant Makers must resist urge to backslide as gas price dips Times are tough outside the U.S., too Chevrolet does tout its small cars Let natural gas power the fuel cell A crash course in collaboration Dodge wouldn't rush the RamBox Plastics are losing cost advantage Suppliers expect to benefit from tougher CO2 rules 'People just want Ford to go' For now, Honda will skip electric vehicles Toyota, Subaru enter race to market electric vehicles China exports squeezed Study: 15% of wrecked autos got washed titles Mercedes megadealer is bullish on luxury Sheehy: 'We are not in business for nostalgia' Automakers use driving schools as marketing tools Dodge smoothes Ram's rough edges â a little Honda touts leasing while others fall back Alysha Webb Study: Nonprime car loans get longer Dealer CPA group picks leader BMW, Edmunds team up on loan site for consumers Va. Honda dealership loses protest bid Judge throws out deceptive-ads lawsuit against Toyota in Arkansas Mo. dealership's protest gets go-ahead Pa. court throws out suit against Ford, dealership Dealers Ross' interiors company pushes into China, India More than a game Nissan's Tavares: Green conference keynoter Quality group seeks to set consulting standards Personnel Dana to shift HQ by Sept. '09 Tenneco to supply Volvo XC60 BMW gets Siemens conveyors IAC to cut 280 jobs in Sweden Polytec to acquire Peguform Metaldyne to sell Italy operation Federal-Mogul to build India plant Beck, Delphi make pact TRW to supply Chinese sedan Auto profits rise in Russia Black Book expands data Hayes Lemmerz cuts losses Ford: Buyouts are a tough sell GM's party plans include production Volt An ice-cold August for auto sales Big drop in Aug. output Lights, camera . . . Volt? In case the roads get too quiet . . . The Insight rides again Lagonda brand will be back Milwaukee road trip: No old pals, but 1 new lesson Choice of Odell seen as Ford vote of confidence in Volvo Dana sort of wins an award Automotive News - September 8, 2008 Automotive News - September 8, 2008 - (Page Introducti) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 1) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 2) Automotive News - September 8, 2008 - Toyota delays RAV4 plan (Page 3) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 4) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 5) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 6) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 7) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 8) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 9) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 10) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 11) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 12) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 13) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 14) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 15) Automotive News - September 8, 2008 - Suppliers expect to benefit from tougher CO2 rules (Page 16) Automotive News - September 8, 2008 - 'People just want Ford to go' (Page 16A) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16B) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16C) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16D) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 17) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 18) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 19) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 20) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 21) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 22) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 23) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 24) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 25) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 26) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 27) Automotive News - September 8, 2008 - Automakers use driving schools as marketing tools (Page 28) Automotive News - September 8, 2008 - Dodge smoothes Ram's rough edges â a little (Page 29) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 30) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 31) Automotive News - September 8, 2008 - Judge throws out deceptive-ads lawsuit against Toyota in Arkansas (Page 32) Automotive News - September 8, 2008 - Pa. court throws out suit against Ford, dealership (Page 33) Automotive News - September 8, 2008 - Dealers (Page 34) Automotive News - September 8, 2008 - More than a game (Page 35) Automotive News - September 8, 2008 - Personnel (Page 36) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 37) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 38) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 39) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 40) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 41) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 42) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 43) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 44) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 45) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 46) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 47) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 48) Automotive News - September 8, 2008 - Big drop in Aug. output (Page 49) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 50) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 51) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 52)
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