Help wanted: Major automotive supplier needs CEO. Must be a Renaissance man, able to reassure nervous investors, soothe cranky customers, penetrate overseas markets and read Alan Greenspan's mind.
In a panel discussion with Automotive News, four top CEOs shared their thoughts about a wide range of issues. They were interviewed in July by Editor Peter Brown and Industry Editor David Sedgwick. Edited excerpts of that discussion follow.
Our economic boom seems to be like the Energizer Bunny - it keeps going and going and going. Now that the auto industry is headed toward a 17-million-unit year, are you having trouble keeping up with demand for parts?
Visteon Automotive Systems' Craig Muhlhauser: We've had to keep working during summer shutdown in a number of plants to maintain pace with demand.
We still don't have the flexibility in our factories that we need to meet changing demand. But we've been able to keep up. In some cases, we are delivering 20 percent more than our plants' capacity.
It is putting a strain on the work force. Recently, we've been concerned about the hot weather and especially concerned about maintaining the level of safety in our plants. For the balance of the year, we anticipate strong demand in North America.
Are chronic overtime and overworked employees causing any quality problems?
Muhlhauser: Not so far. The issues for us are premium costs in terms of excessive amounts of overtime. The other problem is premium freight. The problems we have delivering on time is not so much due to our manufacturing abilities but reliable transportation.
In some cases, we've had to charter helicopters to maintain a supply of parts. We'd like to move more aggressively to deliver parts right to our customers' production facilities. We rely on our customers' transportation, which has been fairly unreliable.
Tenneco Automotive's Mark Frissora: Our business is balanced between the aftermarket and original equipment. The aftermarket for exhausts has been shrinking, so we actually have excess capacity. In the second half of the year, we think there will be some decreases in the current level of production.
In general, corporate profits have been sensational. How are you doing?
Lear Corp.'s Kenneth Way: The fundamentals are good. Everybody is worried about the bubble bursting. But if you look at inflation and employment rates, everything looks pretty good. You've got to be flexible. You've got to be able to react to volume changes. That's the name of the game.
How is business at Delphi, J.T., now that you are independent?
Delphi Automotive Systems Corp.'s J.T. Battenberg III: I think it's been very positive. We just had two quarters of record bookings. We booked $6 billion of new business in the first quarter and $9 billion in the second quarter. Of the $9 billion we booked, $6 billion was General Motors business and $3 billion was non-GM business. I am very pleased. I just hope we can keep it up.
Is it conceivable that the economy has become recession-proof?
Way: If you look at the manufacturing system over the past 10 years, it's a totally different industry. People don't realize it. Look at what technology has brought. We are cutting back on inventory at every step of the process.
That was part of the knock on the cyclical car business: Every time we had an economic hiccup, we had all our cash and inventory in the wrong places. That's not going to happen this time around.
Is that because of information technology?
Way: Yes. You are operating a manufacturing business with a lot less people, a lot less assets and a lot less cash on the floor.
And a lot less inventory.
Way: It's great.
Among suppliers, the growth business seems to be electronics. There is also sales growth for makers of instrument panels and the components that go with them. Visteon makes practically all the componentry that goes into an instrument panel. Does it make sense for Visteon and Lear to merge?
Way: I can't comment. Ten years ago, we were a stamping supplier. I don't know where the heck we are going next. Our customers are going to tell us what products to put together. They really are partners when strategic decisions are made. We sit down and talk about assets and products and where they want us to invest.
How are your companies doing overseas in developing markets such as South America and Asia? J.T., is Delphi losing money in Asia, or have those economies begun a turnaround?
Battenberg: No, we are not losing money in Asia. The market is beginning to bottom out. I wouldn't say it's rebounding. It's operating at a pretty low level, but at least the bottom has been reached in most Asian countries. We are seeing some increasing orders, but it's from a very low base.
Do you see opportunities to buy Asian suppliers at bargain prices?
Battenberg: I think there are buying opportunities. We are looking at a number of companies overseas.
GM, Ford Motor Co. and DaimlerChrysler Corp. have launched major drives to cut warranty repair costs. Over the past couple of years, DaimlerChrysler has put dozens of top suppliers online, so they can get repair data directly from Chrysler dealers. Now Ford and GM are experimenting with the same concept, so that suppliers can get repair data quickly to fix a problem. Is this a good idea?
Way: I think it's a good program. We started with a pilot program with one of the automakers a couple of years ago. That data was always protected before. By opening up that data to us, we can react quicker.
So you get repair data directly from the dealers?
Way: Oh, yeah. We used to have these glovebox surveys, but they didn't work too well. With direct information, we work together to lower warranty costs. Everybody wins. We can get feedback and make design changes very quickly instead of waiting for long-term data to come in.
Frissora: We had the exact same success with Chrysler. If we have total design responsibility, absorbing warranty costs is a nonissue, as long as we have access to the information on a real-time basis.
Does Visteon get online warranty repair data directly from dealers?
Muhlhauser: We are not directly connected to dealers. We are connected indirectly to the purchasing departments of our customers.
Does Delphi get online warranty data from dealers?
Battenberg: No, except under special circumstances. If there are specific case studies where information is needed rapidly, we can get access with the automakers. But generally speaking, no, not on a daily basis.