Delphi Automotive Systems Corp. has picked up the pace in Asia since the components giant became independent of General Motors.
So far in 1999, Delphi has announced six acquisitions, joint ventures or partnerships in the Asia-Pacific region.
Delphi bought a 5.9 percent stake in Tokyo-based Akebono Brake Industry Co., and is expanding a joint venture with Calsonic Corp. in Japan to produce air conditioning compressors. The company is working with Japan's Ashimori Industry Co. to produce seat belts, and has formed a wiring joint venture with Hasu Industries Sdn. Bhd. in Malaysia.
Even bigger was the deal that never happened: Delphi approached Toyota Motor Corp. with an offer to sell 10 percent of itself to the Japanese carmaker. Toyota mulled the offer, then said no.
As regional markets shake off the effects of the Asian economic crisis, Delphi sees more growth ahead in Asia.
William Ebbert, president of Delphi Asia Pacific, spoke with Automotive News Asia Editor James B. Treece in Tokyo to discuss where Delphi is going in Asia.
What are your forecasts for Delphi Asia Pacific this year?
We think we'll be up 10 to 15 percent sales-volumewise over last year.
We're pretty much right on prediction. So we haven't seen any adverse effects. We had predicted that Korea would come out faster. We had predicted that China would continue to grow, though maybe not at as robust a pace as we would have liked - maybe 7 or 8 percent growth.
Long term, what is your expectation?
Today through 2003, we see our sales doubling. So that would tell you we're looking at growth rates of 20 percent on a year-to-year basis ...
(But) we generally don't see industry volumes reaching the 1997 levels, which was the last big year, until about 2002 or 2003. In Japan, look out five years and we don't see them ever getting back to that period of time when their production peaked.
But generally, it's a pretty good growth rate.
This year, which Asian markets are growing?
Korea is showing a very robust growth rate. You have economies like Malaysia that are coming out strong. Thailand now is showing some pretty good increases. China on a year-to-year basis is up about 7 percent.
The only one that isn't growing is here in Japan, but we don't have a substantial production base here in Japan, beyond some joint ventures.
What are your opportunities in Japan?
We aren't going to get much growth in Japan proper, but with Japanese companies outside of Japan, in Europe, North America, and Southeast Asia. Our sales to the Japanese on a global basis will grow. It won't quite double.
What percent of Delphi's Asia Pacific business is non-GM?
Most of it. Probably 90, 95 percent.
Who are your biggest customers?
Daewoo, of course. Their situation is causing some heartburn.
Toyota as a customer is very large, but mostly outside of the region. We do about $500 million worth of business on an annual basis with Toyota, and most of that would be in North America.
We have big chunks of business with Isuzu, with Suzuki. There's new business that we brought on in China with the new General Motors venture and the other manufacturers there. But the biggest by far would be the Korean base.
We've done a couple of ventures there recently. This year we did a venture with a company in airbags, and most of that business goes to Hyundai. So we've been able to expand our customer base there via some joint ventures.
Some suppliers today are demanding cash from Daewoo because of payment concerns. What sort of payment terms are you insisting on?
We're watching that pretty close. We have had a long-term partnership with Daewoo. They are our partners in at least four or five of the joint ventures that we have.
On some of our direct shipments, we're looking at letters of credit and things of that nature in order to protect ourselves going forward.
What was behind Delphi's going to Toyota and saying, how would you like to buy a piece of our company?
We don't really talk a lot about it. We have meetings constantly with Toyota. They're one of our largest and best customers. You talk about a lot of things on the record and off the record, but we really don't comment on those internal meetings we have with them.
In the first six months of this year, Delphi has lined up $5 billion in new non-GM contracts. Of course, that business will be spread over a number of years. Of that $5 billion, what portion represents Asia Pacific?
Generally, I think it was about $500 million of the $5 billion outside of GM.
The keiretsu system of affiliated suppliers here in Japan seems to be changing.
I think it's changing, to some degree.
It varies by automaker. Toyota, for one, still has a pretty strong keiretsu - still uses them, still supports them. At the same time, they're willing to go outside and look for suppliers who have technical capability, who have a global presence, and things of that nature, also. It's kind of a balance.
There's business you get today because you are the most competitive or the most technologically competent or whatever, with Toyota that maybe five, six, seven years ago you wouldn't have because it would have just naturally gone to one of their keiretsu suppliers. So in that sense it's changing. But it's still a pretty strong part of the Japanese system.
Maybe less so with Nissan. Although there's Nissan sitting there with a pretty good keiretsu base - you know, Kansei and Calsonic. They're trying to figure out how to deal with that as part of their new partnership with Renault. But it's changing.
It seems like the consolidation of the parts industry that has moved through North America and Europe is washing up on these shores, too. I see many more deals in the newspaper than I did a few years ago. But is that accurate, or an overstatement?
It's accurate; it's happening. But it's slow. You form a very small ownership position, you grow it, you maybe increase it and so forth.
But it's unlike a lot of the deals we do in Korea, China or wherever. You go in, you partner, you buy 50 percent of the business. You're a partner.
Those kind of deals just don't seem to happen here. Here, you buy 4 percent, you buy 5 percent, you make the jump to 20 percent.
So as I say, it's happening. But it's still a slow process here.
Is it held back by issues of control?
The automakers don't like outsourcing, and they aren't comfortable giving up the integrator role when it comes to modules.
They're not. Absolutely, they're not. And yet, they're doing a lot of soul-searching. They have been less willing to give that away, compared to other areas of the world.
If Toyota is at one end of the spectrum, drawing in its keiretsu companies even closer, and Nissan is at the other, saying it will look at its keiretsu a very different way, where are the others?
I'd put them in the middle, but closer to Toyota.