Crowning Achievement

It's a mild, spring day in Manhattan, and Hiromu Okabe is in good spirits.

He should be. It's not every day that an automotive supplier visits the New York Stock Exchange to receive the prestigious Chairman's Award from J.D. Power & Associates. In fact, the quality award's been given only eight times, and never before has an automotive supplier been on the receiving end.

As the president and chief executive officer of Denso Corp., Okabe claims the award on behalf of Japan's No.1 supplier.

In many ways, the Chairman's Award is a crowning achievement for Okabe's 42 years of service to Denso. True, the award is bestowed on the entire company, but Okabe, through his leadership, embodies all that is Denso.

He worked his way up from the bottom of the company, starting in the accounting department in 1960 — the ink barely dry on his bachelor's degree in economics from Nagoya University. Today, after six years as president, Okabe leads a $16.2 billion company that employs 85,000 people in 29 countries.

Okabe took a few minutes from his big day in New York to talk with WAW about the industry, the economy and the prospects for his company.

Denso has performed remarkably well, given the protracted recession in its home market. Denso finished the first half of its fiscal year in September with a profit of ¥37 billion ($318 million), a 41% increase over the same period a year earlier. Sales were up 10%, and even in the battered Japanese market, revenues rose 7%.

While the major U.S.-based suppliers downsize and close plants, Denso is going in the opposite direction. “We think Denso's belief in and continued efforts for a ‘quality first’ concept and ‘customer-centric’ thinking are what made Denso grow to be what it is today,” Okabe says through an interpreter.

Okabe downplays the concerns of top General Motors Corp. executives who contend that the Japanese auto makers have a 30% cost advantage ($4,000 per car) over the Big Three because of the low yen. GM has accused the Japanese government of keeping the yen undervalued so Japanese auto makers will have a competitive advantage in the U.S.

He concedes the lower yen makes for higher profits. “But it is not a major reason for Denso's business growth,” he says. “What is most important for our business is a continued supply of quality products that satisfy customer needs. That's why Denso will continue to grow in the future.”

He adds that the low yen will not derail Denso's plans for additional production facilities in North America.

Toyota Motor Corp. created Nippondenso Co. Ltd. as an independent parts maker in 1949 but retains 24.9% ownership of the supplier today. Okabe shortened the name to Denso in 1996 to reflect the company's global scope.

So does Denso need to separate fully from Toyota the way Delphi Corp. and Visteon Corp. have separated from GM and Ford Motor Co.? Okabe isn't willing to comment, except to say that Toyota remains Denso's largest customer (50% of global sales), and that the supplier will remain a part of the Toyota Group.

Despite cultural differences, Denso and Delphi are similar. Both compete head-to-head in cockpits, climate control, antilock brake controls, fuel injection, electrical systems and telematics. Each is the largest supplier in its home market, largely by virtue of affiliation with each region's largest auto maker. GM spun off Delphi as an independent company three years ago.

With $26 billion in sales, Delphi remains well ahead of Denso's $16.2 billion in size. But Visteon Corp. and Robert Bosch GmbH have been hovering around $18 billion in global sales, and Denso could surpass either or both in the next few years.

“Denso aims to be among the world's top three auto suppliers,” Okabe says. “We will make efforts to continue to be ‘competitive’ enough to rival other suppliers, so that we can survive and moreover keep ahead of competition.”