Future Chinese Technology Solutions to Lead Auto Industry

TRAVERSE CITY, MI – China’s automotive and truck market will be nearly 7 million vehicles this year, but the “local transportation” market of motorcycles, 3-wheelers, farm vehicles and 1-cyl. motor carts will add another 35 million motor vehicles to China’s roads.

That “is the biggest single market opportunity in the world,” says Jack Perkowski, CEO of ASIMCO, the Chinese auto components company he founded in 1994 that today is among China’s top-10 companies with sales of $400 million.

Consumers who can’t afford a car buy a farm tractor instead, he says. But in time, these low-priced vehicles will move up the technology ladder as their owners move up in income.

At the same time, pollution and the lack of local oil supplies in China are serious problems facing the government. “What’s going to come out of (the market growth) is a lower-cost solution” to fuel economy, Perkowski says, insisting China will become a technology leader as it solves it transportation issues.

In the near term, he is persuaded China will turn to diesel fuel. ASIMCO is a leading producer of diesel fuel-injection systems for trucks.

“We think diesel is going to be big in China,” Perkowski says. “It’s the easiest first step to saving fuel. We’re selling to all the major diesel-engine companies in China, and that’s what they are hearing. Some of them are state owned enterprises.”

ASIMCO CEO Jack Perkowski

The debate over intellectual property exists because there is a technology gap, and “that is going to close in about five years,” he says, after which technology developed in China will be coveted in other parts of the world.

ASIMCO owns 18 plants in China, including six built in the last year. Although commercial vehicles account for 55% of company sales, most of the new plants also can produce components for the light-vehicle market.

ASIMCO has two camshaft plants in Michigan, as well, which it bought from Federal-Mogul Corp. And today it announced plans to form a joint venture with Phillips and Temro Industries, a North American producer of cold start and emissions control products, to design, manufacture and distribute electrical intake air heaters for the Chinese diesel-engine market.

Perkowski says he expects more Chinese companies to make such investments.

Under Federal-Mogul, the camshaft plants made the components solely in in the U.S. In contrast, ASIMCO designs the parts in both China and the U.S.; then makes the castings in China, where costs are low; after which it ships them to Michigan, where the final machining and quality control is done closer to customers.

China is fast, Perkowski says. ASIMCO bought a Federal-Mogul casting plant in the U.K. from the bankrupt company and shipped it to China last year in 40 containers that arrived in October. The company began casting camshafts for shipment to Michigan in December.

Now ASIMCO is looking for acquisitions at Europe and North America.

“We are looking for acquisitions of technology that no one else can do in China,” Perkowski says. “We will stay away from products that other people can do.”

Although China has 1 billion people who have not participated in the economic spurt of the last two decades, Perkowski does not worry about social revolution.

He says the government is well aware of the disparity and is following policies to help rural areas, through eliminating farm taxes and pushing investment in the interior areas.

“Keeping the economy growing is a priority,” Perkowski says. “They are going to do what’s best for China,” so there is little likelihood the government would devalue the currency.

And because the country remains 50% rural, it has a large labor surplus that will keep prices low, he says. At the same time, China’s decentralized government of China has encouraged overcapacity in basic industries such as steel making, which also will result in lower prices.

“The biggest problem China has is a (need for) more efficient use of capital,” Perkowski says. “To do that, China needs to break the (Communist) Party’s control over banks and the legal system,” and that is not evident.