Few people in the auto industry are more bullish about manufacturing in the United States than Richard E. Dauch, CEO of American Axle & Manufactur-ing Holdings Inc. At a time when suppliers are shipping factories and technology to low-cost countries such as China, Dauch has been bringing business back to the United States. He spoke recently with Staff Reporter Richard Truett.
How were you able to win a contract for a General Motors driveshaft that was made in China and bring it back to Detroit?
Sourcing is much more than just cost or price. It's a package of all the different features, starting with technology and quality and delivery. Cost and price are a part of that. We talked to the constituency here that has an impact, whether it is our employees, unions that represent them or our customers, to make sure our overall package was competitive, and that includes logistics. Long story short, we demonstrated to the customer that we had good value, competitive economics and superior product.
We went to General Motors and said, "We have this product. It's technically superior to our competition. We would produce it domestically, which would make your logistics much more friendly, and we will give this kind of economic package, and here's our warranty performance track record, and here's our quality track record, and here's our capacity." All of a sudden, we earned the business.
What's the cost difference between the driveshaft made in China and the one you'll make here?
It's very close. Sometimes you have to get within 5, 10 or 15 percent, and then other factors become important. Too often now, everyone wants to be zero in one thing: cost or price. They are important and always will be and should be. But focusing only on cost and price is a dangerous thing to do. There are many more features you have to take a look at.
Logistics is one area where American manufacturers have a clear advantage over suppliers in China. How do you take advantage of that when you are negotiating for new business?
Logistics is a differentiator. But not many people talk about that. There are two things you vitally have to have if you are going to have just-in-time materials management. That's predictability and repeatability. You can then sequentially schedule parts deliveries. The farther you are away from (the supplier) the more complications. When you get multiple time zones away, logistics becomes a much more important differentiator.
Can you get more business with other automakers by stressing your ability to deliver high-quality goods at reasonable cost and a faster pace than parts that are outsourced from another country?
Yes. Two years ago we brought back from Mexico an axle. Our customer has been extremely pleased.