Automotive manufacturers must move facilities to China to be globally competitive, according to B. Edward Ewing, chairman and chief executive officer of Key Safety Systems Inc.
He spoke during the company's news conference to inaugurate its Asian technology center, a joint venture with Yanfeng Visteon Automotive Parts Co. Ltd. called Yanfeng Key (Shanghai) Automotive Safety Systems Co. Ltd.
``I do not think that if you are in the automotive industry, [manufacturing in China] is an option; I believe it is a strategy that is mandatory in order to be competitive,'' Ewing said.
Sterling Heights, Mich.-based Key Safety Systems makes air bag modules, seat belt assemblies, steering wheels and automotive electronics. The company spent $30 million on the Shanghai technology and manufacturing center, which Ewing said ``represents our commitment to the Chinese market and Asia-Pacific region as a whole.''
Manufacturing since mid-2005 in Shanghai, with another joint venture in Tianjin, China, Key exports about 30,000 air bags per month to Hyundai Motor Co. of Seoul, South Korea. Ewing expects exports to increase.
``It is our strategy, and my strategy, to produce and design from this center for all our customers in Asia, Europe, North America and around the world,'' he said.
Ewing added that current Key sales initiatives in North America and Europe for 2008-10 are concentrating on products that will be manufactured in China.
Key has two more technology centers in North America and Germany, and employs 9,000 worldwide. The firm has 36 facilities in 12 countries. Formerly known as Breed Technologies Inc., the company was on the verge of bankruptcy before Ewing took over in April 2003, creating Key Automotive Group out of Breed and Key Plastics LLC.
Ewing, also chairman of Key's majority shareholder, Ewing Management Group, expects China to become the center of the global automotive market. He unapologetically said he expects to move more manufacturing capability to China as EMG makes acquisitions. He said common sense forms the basis of his strategy.
``The common sense that I suggested ... is simply moving to designing the best parts, producing at the lowest cost, and having the intellectual flexibility to change quicker than your competition every day, every week, every month, every year,'' he said.
Ewing said the lack of competitiveness on the part of North American auto manufacturers stems from an inability to produce efficiently.
However, Ewing said he is optimistic about the global auto industry, and part of that optimism led to growing his business in China.
Brian Kaiser, Key's senior vice president of operations, said the company's vision includes growing the Asian operations to more than 25 percent of global sales. Key posted sales of $1.05 billion in 2005, with Asian sales accounting for 18 percent. The firm projects sales of $1.25 billion by 2009, with Asian sales accounting for 24 percent of the total. The sales forecasts are based on the increasing trend toward improved safety content in vehicles, particularly in the number of air bags required for automobiles.
By contrast, the company expects North American sales to increase only 1 percent in the years to 2009 and European sales to drop from the current 37 percent to 32 percent of the global total.
The Asian technology and manufacturing center employs more than 65 engineers, and that figure could expand to 100 by the end of 2006, and eventually to 500. The center boasts the same design, development and testing facilities as the technology centers in Frankfurt, Germany, and Detroit. The collocated manufacturing facility can produce 2 million steering wheels, 5 million air bag modules and 2 million seat belt assemblies per year.
Ewing said he believes ``the collocation of engineering and manufacturing facilities has a higher possibility of producing low-cost, high-quality products.''
Key expects sales in China to grow to more than $250 million with the addition of the 140,000-square-foot technology center to the 240,000-square-foot manufacturing facility.