Sleeping with the enemy?

While the goal of the headline this month is to catch your eye, the statement also reflects the true feelings of our industry (as a whole) when we discuss partnering with metalcasting firms in China, Brazil, India or other low-cost nations.

A recent article in the Chicago Tribune discussed Wanxiang America Corp., a Chinese-owned company based in Elgin, Ill. that has been buying auto supply assets (bankrupt and underperforming facilities) in the U.S. and Europe in hopes of propelling itself into a world-class auto supplier.

To many in our industry, the global game of automotive supply seems worlds away from job-shop metalcasting, but several of the sentiments and quotes in this article are thought-provoking and worthy of review.</p>

<pre> "It doesn't matter where you are, it doesn't matter what

you face--you have to compete. It's the capitalist spirit, the killer spirit. (However), you don't kill your competitor to make yourself win. Maybe in the old times, yes, but not in today's environment. In today's environment you improve yourself. You need to be better than him to compete. There's no mercy. It's competition. It's not

only the Chinese. It's Taiwanese, Korean, Japanese, Mexican, whatever. We're talking about a global economy period."--Pin Ni, Wanxiang president. </pre> <p>While Ni's quote is provocative and sounds as if it could be said on a battlefield as much as in a boardroom, the reality for Wanxiang America Corp. is different.

Despite Ni's belief in the "killer" spirit, Wanxiang has not been fighting to better its competition by undercutting prices to steal marketshare. To date, Wanxiang is partnering with U.S. automotive suppliers to become combined U.S.-China suppliers that are more customer- and cost-effective.

According to the article, this Chinese firm understands that U.S. suppliers often have superior engineering and design expertise, customer relationships and distribution channels accompanying quality manufacturing. In addition, U.S. suppliers can provide "just in time" delivery to U.S. customers as well as quick responses to special order requests.

"You can't do that from 10,000 miles away," Ni was quoted. "You have to be here."

In the example cited in the article, Wanxiang partnered with Rockford Powertrain, Inc., a supplier of heavy-duty driveline components for off-road applications. Rockford was about to close its doors a few years ago before this partnership was born because it was weighed down by high labor rates, pension and health care obligations, and tax and regulatory burden. The partnership has moved some of Rockford's manufacturing to China, with the engineering, design, final assembly and quality assurance remaining in the U.S. While the firm employed more than 800 in the U.S. in 1998 and only 200 today, the plant remains open and is thriving.

While this U.S.-China partnership was born out of necessity for Rockford, I see a more positive spin for today's U.S. metalcasters--another potential business opportunity.

Now I am not saying we should all give up manufacturing in the U.S. and become glorified casting brokers. The reality is that our industry's combination of manufacturing expertise, engineering skill and customer service makes us the best supply option for our U.S. customer base both today and tomorrow. But, on the flip side, we just can't dismiss partnerships with casting suppliers from low-cost labor nations because many of our customers are demanding it and, more importantly, growth potential exists.

These partnerships open up pathways to new markets. U.S. and European OEMs are opening up assembly plants in low-cost labor nations at a record pace. While today these OEMs are taking advantage of the low-cost manufacturing to bring finished product back to the U.S., tomorrow they will be supplying the tremendous demand in those countries. Why shouldn't U.S. metalcasters have a piece of that supply business?

These are complex issues that can't be answered in one-page editorials, but my goal is to make you think. As Ni said, our engineering and customer service is a huge advantage in the global marketplace. Couple that with the ever-increasing efficiencies of our production, and you have global strength.

Alfred T. Spada, Editor-in-chief

If you have any comments about this editorial or any other item that appears in MODERN CASTING, email me at [e-mail].