COMING TO AMERICA

Chinese suppliers quickly finding a home in the U.S.

Fuyao is bringing its glass fabrication, in China plant above, to Moraine, Ohio.
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North America may seem like a distant dream for China's automakers, but that's not the case for suppliers.

No longer content to export parts from China, a core group of enterprising suppliers is establishing factories in North America to supply automakers in the region.

Some Chinese companies are buying established U.S. suppliers, while others are building their own plants. Either way, they want to establish themselves as global players.

During the past eight months, the dealmaking has intensified. As North American vehicle production rises, suppliers are struggling to keep up with demand. Spotting an opportunity, Chinese suppliers are entering the market. (See list, Page 68.)

For example, Fuyao Glass Industry Group Co. announced plans in January to build a $200 million factory within General Motors' shuttered Moraine, Ohio, assembly plant.

Fuyao CEO Cao Dawang on U.S. automakers: "They really want us to come."

"The U.S. is a big auto producer, and it doesn't have enough glass," said Fuyao CEO Cao Dewang during a July 14 interview. "We've gotten repeated requests from our customers in North America to establish a facility here," he said. "They really want us to come."

Flush with cash -- and with the central government's all-important blessing -- Chinese companies have increased their overseas investments sharply during the past couple of years.

According to China's National Bureau of Statistics, Chinese manufacturing companies invested nearly $8.7 billion overseas in 2012, up 23 percent from the previous year. Data for 2013 are not yet available.

Chinese suppliers "are really seriously considering moving to this market and manufacturing over here," said Shusheng Wang, co-director of global business practice at Miller Canfield, a Detroit law firm.

Wang says Miller Canfield has more than 100 Chinese clients, of whom 80 percent are automotive manufacturers. "For the past two years, we've been getting inquiries every week," he said.

Chinese suppliers are setting up shop in North America for several reasons. Factory wages in China are rising 10 percent annually, and shipping costs are high. As a result, components shipped from China to North America no longer command a huge price advantage, formerly dubbed "the China price."

Moreover, automakers are starting to ask key Chinese vendors to be global suppliers -- just like their peers in Japan, North America and Europe.

And China's government has begun encouraging domestic suppliers to invest in overseas factories, according to Wang. "The rules make investment [overseas] easier," he said.

Though there have been a number of major investments this year, the Fuyao deal in January served as a wake-up call for many Chinese suppliers, Wang argues.

In part, that's because Fuyao had the confidence and the cash to build its own plant, rather than buy a North American supplier.

That deal "made a big impression in China," Wang said. "People thought: 'This is what a good supplier does. We need to think about this.'"

Fuyao Glass Industry Group is the largest automotive glass producer in China. A plant in China is shown here. Fuyao plans a $200 million factory in Ohio.

Already a global player


Cao Dewang sits at a folding table inside GM's former SUV assembly plant in Moraine, a tired, Rust Belt city about 50 miles north of Cincinnati.

Gesturing toward a blueprint perched on an easel behind him, Cao -- who founded Fuyao Glass -- points out the assembly lines he plans to install in this industrial relic.

At the other end of the dimly lit plant, workers are tearing up part of the concrete floor with jackhammers as dump trucks shuttle in and out. The noise doesn't seem to bother Cao, as he displays his blueprints to a visitor.

The purchase of the plant was followed by the acquisition in July of PPG Industries' "float" glass plant in Mount Zion, Ill., which will produce raw glass for the Moraine plant.

Asked whether he wants to be a global producer on a par with Saint-Gobain, Pilkington and Pittsburgh Glass Works, Cao snorted. "We became a global player 10 years ago," he said.

Indeed. Fuyao is China's largest automotive glass producer, with 65 percent of the country's original-equipment automotive glass market. And it is a rising player, with 18 percent of the worldwide market -- enough to generate $2.5 billion in sales last year.

This might seem like heady stuff for Cao, a man with just seven years of formal education who started out as a fruit and tobacco vendor on the streets of his hometown of Gaoshan in east China's coastal Fujian province.

In 1983, Cao was offered a contract to run an unprofitable glass factory where he had been a salesman. In 1987, he launched his own automotive glass company and later licensed technology from PPG Industries to build two state-of-the-art production lines.

Overseas expansion


Fuyao's network of plants serves most major automakers in China. Now, Cao is changing his overseas business strategy, which once relied on exports from his eight float glass plants in China.

The company currently has no other plants outside China, except for a fabrication plant in Russia and a small glass-finishing facility in Lake Orion, Mich.

But Cao believes his plants in Moraine and Mount Zion will help him establish a foothold in North America. The Moraine plant already has lined up a list of customers, including GM, Chrysler, Hyundai, Kia and Honda. Others will follow, he says.

Cao is confident he will succeed. He believes North America's other glass producers cannot respond quickly enough to handle the region's growing production.

"Even though there are still a lot of obstacles," Cao said, "we think we can take on this risk and make this a success."

Rust Belt rebirth


Nexteer Automotive's sprawling Buena Vista Township plant is visible just east of Interstate 75 near Saginaw, Mich.

Saginaw has suffered high crime and poverty as GM closed local factories. But Nexteer has enjoyed a rebirth since it was acquired by Pacific Century Motors -- an affiliate of the Beijing municipal government -- in 2010.

Nexteer, which produces electric power-steering systems, half shafts and other components, had been starved of capital investment during the sequential bankruptcies of its former corporate owners, Delphi and GM.

Now, Nexteer is growing again. The Buena Vista Township plant, which houses six factories under one roof, is undergoing a $300 million overhaul. Workers are tearing out bulky transfer presses and installing new work stations to produce additional electric power-steering systems.

"We have re-energized our product portfolio," said Laurent Bresson, Nexteer's president. "The capital investment is massive."

The sales numbers bear him out. Last year, Nexteer generated $2.4 billion in global sales, up from $2.2 billion the previous year.

The company produces steering systems for vehicles as small as the Fiat 500 and Mini, but the real money is in trucks. By the end of 2014, Nexteer will supply steering systems for nine out of 10 full-sized pickups and SUVs sold in North America, Bresson says.

He says the company's Chinese owners gave him the capital that Nexteer had lacked to develop new products and expand in China, India, Brazil and North America.

"When we first met, they told us we were not growing fast enough," Bresson recalled. "They wanted us to grow much faster. So we are growing everywhere in the world."

You can reach David Sedgwick at dsedgwick@crain.com.

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