DETROIT - Tenneco Automotive Inc. seeks more joint venture partners in China in hopes of expanding up to 15 percent annually there for the next five to seven years.
The company wants to ride the growth of Japanese automakers in China, introduce its elastomer business and increase its ride control business.
Tenneco Automotive makes exhaust systems and ride control components in China. It has five joint ventures there. Customers include Nissan, Mitsubishi and Suzuki.
"Toyota is going to be a huge player," says Timothy Donovan, Tenneco Automotive's managing director for the international group. "Honda's got a strong dealership program, so you got to believe they'll be successful in China as well."
At a time when automakers are pushing suppliers into low-cost countries such as China, Tenneco Automotive is well-situated. It entered China in 1995 by partnering with Beijing Automotive.
The company, based in Lake Forest, Ill., posted net income of $27 million on global sales of $3.8 billion last year, compared with a loss of $187 million and $3.5 billion in sales in 2002.
Of last year's sales, $120 million came from China. That grew from $20 million there in 1999.
Michael Dunne, president of Automotive Resources Asia Ltd. in Beijing, says Tenneco Automotive's Chinese growth targets sound reasonable.
"We expect the market to grow by 15 to 20 percent per year for the next two years at least," Dunne says, adding that Japanese automakers and their suppliers will benefit. "The Japanese as a group now control about 32 percent of the market. I expect that to climb to around 50 percent in the next few years."
To keep up with that growth, Tenneco Automotive must find more local partners, says Donovan, 48. He wouldn't name companies.
"One area that we have not tapped yet that we're very successful with in North and South America is the elastomer business - bushings, engine mounts," he says.
Tenneco Automotive also plans to focus more on its ride control business in China, Donovan says. Four of the company's five joint ventures make exhaust systems but only one is dedicated to ride control. That means an 80-20 split in revenue among the businesses.
"I'm in the process of implementing a plan to upgrade our ride control operations, and we're relocating from Beijing central to outside Beijing because I believe ride control will be a big export and aftermarket opportunity," Donovan says.
Although exporting is on Tenneco Automotive's radar screen, the company is concerned more with decreasing imports, thereby decreasing the cost of doing business in China.
"We're still importing anywhere from 25 to 60 percent of the components, whether it be rubber seals, oil for the shocks, steel, base assemblies for struts," Donovan says. "That drives up the costs, particularly when you have tariffs on top of the costs."