China the Answer for Supplier ArvinMeritor
By William Diem WardsAuto.com, Aug 9, 2007 5:56 PM

TRAVERSE CITY, MI – Given the growth in China, ArvinMeritor Inc. is prepared to switch its business dramatically, making parts and systems there and shipping them to North America for assembly.

It’s time to throw away the chess set and learn to play Chinese Go, says Phil Martens, ArvinMeritor senior vice president and president-Light Vehicle Systems business group. Or more appropriately, forget the advice of management gurus Jack Welch and Peter Drucker and learn the way they do business in China.

“We need to think in non-linear patterns,” Martens tells attendees at the Management Business Seminars here, “to appreciate abstractions and subtleties and to plan on several levels simultaneously.”

The Chinese believe their risk of failure “is completely minimized by their likelihood of success,” he says. They are willing to produce well ahead of demand and to accept less than world-class quality on first iterations of new products, and they are “unencumbered by fear.”

ArvinMeritor, which recently inked a joint venture with Chery Automobile Co. Ltd. to produce automotive chassis, needs to move much faster and further into China, he says.

“We need to tap into, and leverage, the positive energy and cost advantages that exist there.”

Phil Martens

A new plant in North America would cost about $30 million and take 18 months to build, he says, while in China it takes $6 million to $10 million and three to six months.

“The tradeoffs that the Chinese make to get there faster and cheaper are – as yet – not well understood by the West,” he says.

Part of the reason is that non-democratic China has central planning. But on the downside, there is no Occupational Safety and Health Admin. to protect workers or the quality of their working life.

Martens sees three preparations that must be made: Have the right people willing to take on the paradigm shift; be ready to “transition some operations to China where time and cost advantages are plentiful;” and partner with emerging Chinese OEMs and learn to do business with them.

Looking for profitability from direct investment in the U.S. is difficult at best, he says, although “we are not turning our backs on the U.S.,” Martens says. “We continue to embrace the idea of assembly here from parts and systems sourced overseas.”