Chinese Suppliers Forging Links to OEMs in U.S.

Last August, Changshu Automotive Interiors, or CAIP as it is usually known, opened an office in Detroit. The Chinese company, which designs, engineers and produces automotive interiors, has big ambitions.

“Our global goal is to by about 2018 be a billion-dollar company,” Sean Stelzer, vice president- North American operations,” tells WardsAuto. “Growth in North America is part of that.”

Just a few years ago, that would have seemed like a pipe dream. The U.S. market already was well-served by established suppliers. But many of those suppliers downsized during the market downturn of 2008 and 2009. That left room for new suppliers to get a foothold in the now-booming market, and Chinese firms are taking advantage of that opportunity.

“We think they will come in, wave after wave,” says Jerry Xu, president of the Detroit Chinese Business Assn.

Xu says he knows of several big Chinese suppliers who are looking to expand into the U.S. Some already are. Wheel maker CITIC Dicastal announced in September it would invest $140 million to refurbish a former solar-panel plant in Greenville, MI, to produce aluminum wheels.

CAIP, which has consolidated sales of about $300 million, is looking to build plants in the U.S. and Mexico, Stelzer says.

Market forecasts point to plenty of demand. New-vehicle sales in the U.S. are expected to hit 17 million units this year.  That will put a huge strain on the existing supplier base, says Dave Andrea, senior vice president-industry analysis and economics at the Original Equipment Suppliers Assn.

Suppliers are running at a median capacity of 80%, he says. The top quartile is running at 86%.

“They are tapped out,” says Andrea. “If two or three customers come at them and ask for a 10% increase or more, they have to say no.”

Joe Hinrichs, Ford president-the Americas, admits suppliers are the potential bottleneck to growth for his company.

“In a relatively short period of time, the industry has come back to 17 million units on an annualized basis,” he told WardsAuto in January.  “It just takes one supplier not having the capacity and you can’t build a vehicle or powertrain. So that’s probably the biggest issue, keeping up with the demand in the near term.”

From Student to Supplier

Chinese companies have been setting up shop in the U.S. for quite a few years. Chongqing Changan Automobile opened a technical center in Michigan in 2011, for example. But those companies were here mainly to learn from the U.S., not supply it. The Changan tech center specifically was set up to learn about chassis technology.

Now, however, many are coming here to do business.

Fuyao Glass Industry, China’s largest automotive-glass manufacturers, bought a former General Motors plant in Ohio for $200 million in January 2014. The glass maker announced in January it would boost its investment to $360 million.

The plant will supply models including the Jeep Grand Cherokee, the new Chrysler 200 sedan and new Chrysler minivan, Honda Civic and several GM global programs including the Chevrolet Cruze.

“Our Chairman is confident that Fuyao is going to grow in North America,” says Chris Feng, president of Fuyao North America Automotive.

It’s not as if Fuyao doesn’t have plenty of competition. Fuyao competes against Saint-Gobain Sekurit, AGC, NSG/Pilkington and PGW, among others, Feng says. He credits Fuyao’s growth to its focus on glass and its on-time delivery.

“Fuyao has 85% to 90% of its revenue come from auto glass,” Feng says. “We have no plan B. We have to be good at what we do.”

CAIP came to the U.S. because its customers asked it to. They include Volkswagen, Audi, BMW, Ford and Daimler, Stelzer says. It plans initially to import product from China while it shops for a plant location. “We are open to any state, any location. We are also looking at Mexico,” he says.

It may set up a joint venture, though it doesn’t want to produce products that compete directly with its existing JV partners in China such as Magna and Germany’s Peguform, he says. CAIP also is looking to acquire companies that already have business booked.

There’s plenty of opportunity, says Stelzer. “The Tier 1 suppliers and OEMs are welcoming this new infusion of hungry, ready-to-grow Chinese companies that want to come in and be a game-changer.”