No sleeping giant; ACG Worldwide sets sights on Asia Pacific

HONGKONG -- The only way General Motors Corp.'s Automotive Components Group-Worldwide can increase non-Gm, non-North American sales to 50% of its business is to succeed in Asia/Pacific.

"The Asia/Pacific automobile industry is growing at a far higher rate than any other region and is predicted to increase 47% in the next 10 years to 22 million units per annum by the year 2004," says William Ebbert, president-ACG Asia Pacific Automotive Components Group. That would mean Asia/Pacific will account for 40% of the world's growth in vehicle production during the period, vs. 36% for all of Europe, 16% for North America and 8% for South America, Mr. Ebbert points out.

The market for automotive components, he says, is projected to grow at a 10% to 15% pace annually in the region, equalled only by forecasts for South America. Europe's components market will grow 7% to 10%, while North America and the aftermarket each are expected to expand at only a 5% to 7% pace.

ACGW notched $775 million in sales in the region last year, including $109 million in Japan. It will see overall sales triple (excluding India which in managed independent of ACG Asia Pacific) within the next five years - double in Japan, Mr. Ebbert predicts in an interview here. Most current sales go to non-GM customers, he says, plus some to GM affiliate Isuzu Motors Ltd. in Japan and Holden's Automotive Ltd. in Australia. That's likely to remain the case in the future.

Japan, a difficult nut for any multinational to crack, ACGW included, is under increasing pressure to lessen its auto parts trade deficit with the U.S., pegged at $19 billion this year, Mr. Ebbert points out. And although most of ACGW's success with Japanese automakers is in selling parts to their transplant affiliates, the GM group recently has been accepted into several companies' supplier associations, which may help it get a firmer toehold on the domestic market. Of its sales to Japanese automakers, only about $50 million is for Japanese production, but Mr. Ebbert expects that, too, to double along with overall sales.

South Korea, where only about 1,500 imported vehicles are sold annually, also is under pressure to open its market, which may mean new opportunities for foreignbased companies. In addition, GM, through its three parts joint ventures with the Daewoo Group, already is fairly well-positioned to take advantage of internal growth there as the country moves to double its vehicle-building capacity to 4 million units annually by 2000.

And, of course China, a linchpin in ACGW's Asia-Pacific plans, also aims to more than double its market to 2 million to 3 million vehicles annually after the turn of the century - 90% of which the country expects to be made locally. "We envision that over 75% of our component production for the Chinese market will eventually move to China in line with the government' policy on localization," Mr. Ebbert says.

There also is a growing demand for products ACGW and other Western suppliers have expertise in - antilock brakes, air bag systems and electronic engine management. To position itself in the region, ACGW now has offices in three countries and a tech center in Japan with more than 100 resident engineers, two manufacturing plants and seven joint ventures. Other manufacturing plants are in the works, including a catalytic converter facility in Malaysia, which is toughening its emissions laws for 1997.

Meanwhile, ACGW is taking a look at Vietnam, which Mr. Ebbert says "will rise up in priority in the short term. He hints that the group may follow Daewoo Motor Corp. there where it has a vehicle-building joint venture, as well as into several other markets. "They have significant growth plans," he says of Daewoo. "They plan to go from 350,000 now to 1 million capacity within five to seven years, plus another I million capacity offshore. We will grow just by supporting them."

ACGW currently has sales of about 500 million in Korea, and Mr. Ebbert says that in the next few years that will triple -- 70% of which will remain Daewoo business.

One of the big challenges for ACGW will be sorting out what to make where. Every country with an emerging auto industry is clamoring for a supplier base, but in order to get economies of scale ACGW will have to make some components in one country for export to others. In that regard, China emerges front and center in the ACGW Asia/Pacific strategy.

"We have a very large North American supply base, a very large European/North African supply base and a South American supply base," Rudolph A. Schlais, former Packard Electric head and recently named to the new position of president-General Motors China Operations, says in an interview with WAW "You'll see China as a (parts) base for the whole Asia/Pacific region."

ACG currently has there joint-venture operations in China Packard Electric Bai Cheng, Beijing Wan Yuan-GM Automotive Electronic Control Co. Ltd. and the most recent, Packard Electric Hebi Ltd.

Mr. Ebbert says three more new ventures will be announced in China within the next six months. And although not all will be successful, ACGW currently has 30 projects under discussion there. "China's the key," he says. "It has the greatest growth long-term, then Korea, because of the substantial manufacturing base we already have there. Japan is a good growth opportunity, mostly with Japanese customers outside of Japan. "

Annual sales of $25.1 billion make ACGW the biggest supplier in the world -- more than twice the size of its nearest competitor, Nippondenso Co. Ltd., says Mr. Ebbert.