interview with magna.docx

interview with magna.docx

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interviewwithmagna

ChinahasmostcompetitivecostbaseforMagna

Fromwww.GFebruary25,2007

FredKao

VicePresidentofMagnaInternationalChina.

Justpriortoassuminghiscurrentposition,Mr.KaohadbeenresponsibleforestablishingtheMagnaClosuresoperationsinChina.ThisincludedtheestablishmentoftheChinasourcingofficeandtheChinamanufacturingoperations.

ReportingtothePresidentofMagnaInternational,MarkHogan,Mr.Kao’sresponsibilitiesincludestrategicoversightofMagna’soperationsfortheRegion.

HispriorexperienceintheautomotiveindustryincludesmanagementresponsibilitieswithGeneralMotorsfrom1984to1989.WithGeneralMotors,Mr.Kaoheldpositionsinengineering,qualitycontrolandproduction.

KeithLomason

ExecutiveDirectorofMagnaInternationalChina.

InFebruary2004,KeithLomasonwasappointedExecutiveDirector,MagnaInternational,China.Keith’sdirectexperiencewithChinadatesbacktotheearly1980’s,whenhewastrainedasaChineseLinguistbytheUSMarineCorps,andhadanopportunitytovisitthemainlandduringa2yeartourofdutyinOkinawa,Japan.AfteranhonorabledischargefromtheMarinesin1985,Keithjoinedhisfamilyrunautomotivebusiness,DouglasandLomasonCompany,whereheheldpositionsinEmployeeInvolvement,Production,MaterialControl,andFactoryManagement.In1993,hevisitedChinaonafact-findingmission,andsubsequentlywasassignedtoperformthepartnerselectionandcontractnegotiationsfortheformationofa50/50Sino-USjointventurefoundedinFebruary1996.KeithwasappointedPresidentof,andmanagedfor8years,ShanghaiLomasonAutomotive,specializinginmanufacturingseatframesforthedomesticmarket.MagnaInternationalacquiredallofDouglasandLomasonCompanyinlate1996,includingthe50%ownershipofShanghaiLomasonAutomotive,andtheJVsubsequentlybecameoneofIntierAutomotive’soperations.Duringhis10+yearsinChina,Keithhasbeenactivewithmanydifferentbusinessandtradeorganizations,includingvariousChambersofCommerce,andiscurrentlyservingatermasaChairmanoftheBoardfortheShanghaiAmericanSchool.

TheSecondEditionofSeriesofInterviewwithMNCAutoPartsSuppliers

Gasgoo:

ok,thanksforyourtimetoaccepttheinterviewfromG.Thefirstquestionis,asweallknow,Magnaisagiantinautomotivepartsindustry,wouldyoupleasetellmeaboutMagna’sperformancein2006,especiallyinChina?

FredKao:

We’vehadaverystrongsuccessfulyear.IthinkmanyofourproductshavebeenlaunchedhereinChina.Asaverydiversifiedcompanywe’venowbeabletobringallofourproductsintoChinatomanufactureandtosupportlocalindustryhere.Likeforexample,mirrorSystem,it’samajorplayerforallofourcustomers.Ourclosureproductsareverystrongfordomesticaswellasexportpartsmarket,seating,interiors,ourstampinginbodystructuralsystemgroup,powertrainaswellasfullvehicleengineeringgroup.SoIthinkthatisareallygoodindicationofhowwe’vedonehere.Inthesenseofallofgroupsandallofproductslinehavebecomeveryactivehere.

Keithlomason:

AsyouknowMagnastructuredintoasactuallyacollectionoftengroupsthatspecializedindifferentcomponentsofthecar.Anditturntoseveractivelyhereproducingparts,theotherthreegroupsarespecializedinconvertiblerooftopsystems,electronicsandexteriorcomponentsareallintheveryactiveinvestigationstagethathelpusintothemarkethere.

Gasgoo:

Magnaisaveryspecialsupplier,becausecompletevehicleassemblyaccountformorethan30%ofyourtotalsales.ItseemsthatMagnahavemorecompetitiveeventhansomeoftheOEMs.SowhatarethekeypointsthatmakeMagnagetsuccessinthisbusiness?

FredKao:

Magnahasalonghistoryinthisbusinessandit’sverycultivated.Ithinkwecouldconsiderittobefourmainpillarsorspecialuniquesofourcompany.Ithinkoneofthefirstonethatmakeussuccessfulisthefactthatwearemuchdiversifiedcompany.Weareabletoproduceawiderangeofproductsasyou’vementioned,fromsmallpartallthewaytothecompletevehicle.Ithinktheotheronewealsoreallyemphasizeisthefactthatyouknowwearecompanythathasincludedcompanycultureinchartertalksaboutemphasizeoninnovationwebelievethattobesuccessfulinthisindustryweneedtohavegoodproducts,therightproductsandrightprice.It’safoundsayingtous.Soinnovationisthekeytous.

Andthethirdonethatisverykeytousisourcooperativeculture.Weareverydecentralizedcompanythatfostersacultureofentrepreneurlismorlikeabusinessmanwiththemselves.Thisallowsustomakequickdecisionsandmakedecisionsthataregoodforthecompany.Andthisiswehavemanypeoplewhoareallquotaownersofthecompany.Ithinkthat’simportantinthisuniqueculture.

Thelastlyofcourseisthefactthatasanylargesupplier,wehaveaglobalfootprintthathelpsustosupportusaroundthewholeworldinNorthAmerica,SouthAmerica,andEuropeandnowinAsia.Ithinkthosefourareasarekeytomakeussuccessful.

Gasgoo:

Ok,It’sveryinteresting.Youcanbuildacar.Whynotyouenterintothisindustry;youcanbecomeacarmakerbecauseyouhavecapabilitytoassemblycompletevehicles.

Keithlomason:

wecertainlydoandwehavealotofcapabilitiesbasedonthelonghistoryofbuildingvehiclesandthatgiveusauniqueperspective.Youknowassemblingvehiclesismorethanjustputtingcomponentstogether.Assembly,wecandoitwellanyway.ThebackgroundforMagnaSteyrandotherMagnagroupsaresuchatengineeringresourcesanddesignmanufacturingprocesses.It’sverycomplete,allthewaythroughtoafterassembling,doingvehicletesting,andcomponentstestthroughouttheprocess.Soit‘sveryinvolvedprocessesthatrequiredlotofcapital,alotofknow-howandnotverymanycompetitorsareableoralreadytodothat.ThereasonthatwedonotbecomeanOEMisthatourbusinessisreallybuiltbeingasupplier,welookattheassemblyvehiclehasbeentheultimatesystem.It’sclosertothecustomerthantire1untiltire0.5.Wedon’twanttogothiscompetitionwithoutanyofourcustomers.ThatwasAOEMwoulddo.

Gasgoo:

Butit’salsoapotentialriskforthecompletevehicleassemblybusinessforinstance,it’sgonebeifthemodelassemblyisnotsopopular,maybeit’sstagnatedforsells,sowhatistheperspectiveasassemblyindustryandcontinuetoincreaseshareofMagana?

Keithlomason:

IthinkthereareseveralreasonswhyanyOEMswouldlookatMaganaasapotentialassemblerandforthereasonsmaybechangingorreducingsomeofourcustomers.It’saperiodofgrowingwithothers.Thecustomersituation,theglobalsalesituation,regionalsalesituationallhasanimpactonthat.Asfarasifaplatformwearebuildinghasforsaleswesuffer,yesthatistherisk.thatwetakewithourcustomer.ButMagnaisalsooneofthemostactiveandaggressivesupplierswhentheycomeactuallygoingtotheOEMfinalcustomers,thecarbuyerandfindingoutwhattheywhat.AlotofinnovationthatMagnahasbeenabletoprovidetoitscustomersespeciallyinNA&Europehavebeenbasedonourresearchwiththeretailbuyers.Andthroughthatwehaveagoodideaforwhatwesellordowell,wetryandchooseourpartnerswiselyinthatrespect,butalsohelpthemunderstandwhattheircustomerwant.Sowemayhopefullysupplythatengineeringproductsofvehicles.That’swell.

Gasgoo:

Magnareleasedasolid2005financialreport.ItisunbelievablethatMagnakeeponsalesgrowthrateatmorethan18%,whileitskeyOEMclients’marketsharedeclineddramatically,whichmeansMagnagainmoresharesfromitsUSbasedcompetitors.CouldyosharewithuswhatisMagna’ssuccessfulsecret?

Isitcost,especiallylabourcostorquality?

Technology,serviceoranythingelse?

Keithlomason:

Youjustansweredthequestion.AsFredpointedoutearly,thediversification,theinnovation,theuniqueculturethatwehave,andourglobalpresencethatallcontributetoourabilitytosatisfyourcustomers’needs.Chinarepresentsauniquemodelthatmostplatformsareproducingweconsideranitchvolumeandtherestoftheworld,soischangingtheperiodhavingtochangethewaytoourcustomerswedobusiness.Butbeingaveryentrepreneurcompanyweareexceedingitsofar.

Gasgoo:

It’snodoubtthatchinaisthemostrapidgrowingautomotivemarketallaroundtheworld.Butforautomotivepartsmarket,JapaniscurrentlydoublethanChina.Actually,compareonly1facilityinJapan,nowMagnahasalmost20facilitiesinChina,DoesitmeanforMagnaChinamarketismoreattrctivethanJapan?

Foraforeignsupplier,whatarethemaindifferencesbetweenthetwomarkets?

FredKao:

Ithinkthatisnottosaywhichismoreorlessimportant,butIthinkfromourperspectiveweviewthewholeAsianmarketasaveryquicklygrowmarket.ThereareverydifferentcharacteristicsinwhichdefinitelycurrentlyrightnowinJapanwherewehaveourfacilitythatmainlyforengineering.Definitelytheleverofinnovation,technologyisalittlemoreadvancedinJapanrightnowstill.InChinaitisrapidlygrowing.ButontheotherhandwhentheycomeintomanufacturingarelustforsomeveryuniquekeyprocessnotbemanufacturinginChina,canbeonlybedonelikeinJapanorKoreasomethinglikethat.Chinahasamuchmorecompetitivecostbaseforthemanufacturing,sowelookatit’sdifferentreasonsforwhyastodecidewhatwearegoingtoputinJapan,whatwearegoingtodohereinChinaandsoon,butdefinitelyfromamanufacturingperspective,Chinaisgoingtoplayamoreandmoreimportantroleasyearsgoon,andthatwil