India wants to lure U.S. auto supply jobs
Sunday, December 5, 2004
India wants to lure U.S. auto supply jobs
Its bid to become a major global player in parts manufacturing poses a challenge to Michigan companies.
By Louis Aguilar / The Detroit News
Clarence Tabb, Jr. / The Detroit News
After nabbing scores of software engineering and call-center jobs from America, India now wants to become a powerhouse in the $1.1 trillion automotive supply industry.
The Indian government recently served notice it plans to compete globally in the auto industry, beginning with the design and production of automotive components. The country's goal is to grow its fledgling $7 billion auto parts sector by $5 billion a year over the next decade.
Such an expansion could create as many as 3 million jobs and attract nearly $50 billion in investment, according to a study by the consulting group McKinsey & Co. for India's Automotive Component Manufacturers Association.
It would also establish India as a serious competitor to Michigan, which remains the nerve center of the automotive parts industry despite losing 53,000 jobs in the sector since 1999.
For now, India is attracting auto parts jobs on a small scale. In April, for example, Livonia-based Acro Service Corp. helped build a small facility in Pune, India, where a small group of Indian engineers handle design work for a Michigan auto parts supplier.
The Indian engineers perform basic computer-aided design testing and send the results back to their Michigan counterparts, who make 60 percent higher salaries.
Similar work is performed by 25 Indian engineers at General Motors Corp.'s India Science Laboratory in Bangalore, which opened three years ago. They corroborate electronically with GM engineers and designers based in Warren and Europe. Troy-based auto parts maker Delphi Corp. opened a similar facility in Bangalore two years ago.
The Indian government, which successfully targeted information technology and computer programming in the 1990s, now believes auto parts could be its next big opportunity.
Other countries -- including China, Brazil, Slovakia and Vietnam -- have similar ambitions to tap into the emerging Asian and Eastern European auto markets, as well as making headway in North America.
More than half of the $5 billion-a-year projected growth in India's auto parts industry will come at the expense of global competitors, including Michigan-based firms, according to the McKinsey & Co. study.
"You should get used to this because you are going to hear these kinds of goals from China to Eastern Europe," said Sean McAlinden, chief economist and vice president of research for the Center for Automotive Research in Ann Arbor.
Michigan and Midwest auto suppliers are still reeling from the first wave of foreign rivals that began to nab jobs and investment two decades ago. Last year, Mexico, Canada, Japan and Germany accounted for 55 percent of auto parts imported into the United States.
Because of the shift, Michigan has lost 21 percent of its auto supply jobs since 1999, according to the Center for Automotive Research. About 172,000 auto supply jobs remain in Michigan.
About 1 in 5 U.S. auto supply jobs, around 127,000, will vanish by the end of the decade as North American firms close plants and move production to lower-cost regions, according to a study this year by Roland Berger Strategy Consultants in Troy.
India, like many countries, wants to cash in on Eastern European and Far East countries opening their gates to foreign investment. India's auto parts industry currently isn't much of a player in Asia or the United States.
But buoyed by its success in attracting American information technology jobs such as call centers and software design, as well as its proximity to China and other growing auto markets, India believes it's ready to tackle manufacturing.
India also is signaling it will aggressively seek high-skill jobs in the auto industry -- the kinds of jobs Michigan government officials have said they need to retain. India has a population of more than 1 billion people. Every year, Indian universities produce more than 350,000 engineers and nearly 5,000 doctorates.
Analysts remain skeptical that India can become a major player in the global auto industry in just a few years.
"No question, India will be a formidable opponent, but the question is, to who and what market?" said Antonio Benecchi, an auto analyst for Roland Berger Strategy consulting firm.
"The initial expansion will eventually serve the expanding market in India and Asia, which may not mean much job dislocation for American workers. But they can cause more immediate problems for Latin America and other Asian competitors," Benecchi said.
When RV Rao recently heard of India's ambitions, the Indian-American shook his head and smiled as he sat in the Livonia offices of Acro.
"The Indian industry can be quite boastful in their predictions," Rao said. "But there is no question there is going to be significant growth. Will there be dislocation of American workers? Unfortunately, yes. How much dislocation? No one can accurately say."
Rao is head of a new Acro subsidiary that is setting up Indian engineering facilities for automakers and suppliers. He helped establish the Puneshop that opened in April and plans to hire another dozen Indian engineers soon. Next month, Acro plans to open another engineering center in Chennai, India, for a Michigan supplier. All of the work once was performed by American workers.
For more than two decades, Acro concentrated on providing automakers and their suppliers with IT staffing and engineers in the United States. About five years ago, automakers and suppliers began to approach the firm about setting up facilities in India.
Acro intends to serve smaller firms that perform contract work for larger auto supply firms.
It hopes that 25 percent of its business will come from low-level design and engineer work currently done by companies and employees of automakers based in the United States and Europe.
"We are not the trendsetters here," Rao said. "But that is the direction the auto industry and the supply industry have taken, and we are responding."
Acro isn't the only one setting up engineering and design outposts in India.
Major companies such as Sundram Fasteners, Bharat Forge, Sona Koyo Steering and Toyota Kirloskar Auto Parts have either secured contracts or are already supplying to vehicle manufacturers abroad.
DaimlerChrysler AG's Detroit Diesel Corp. subsidiary recently announced it would build an Indian plant to manufacture valves for engines.
Amtek Auto Ltd., an Indian auto supplier that builds connecting rods for GM and Ford Motor Co., raised $69 million selling shares to fund acquisitions and expansion plans.
Amtek Auto last year bought U.K.-based GWK Group, which supplies parts to GM and Ford.
In September, a 30-member delegation from India's Automotive Component Manufacturers Association traveled to Detroit to hold talks with Ford, GM, and Delphi officials. Similar talks are now being held with European automakers and suppliers.
Analysts say India's grandiose ambitions are typical of emerging countries that are rushing to take advantage of globalization.
"The biggest threat may be that India steals so much work from Mexico and China that those countries retool and go after other segments of the American market," McAlinden said.
Analysts contend India and other new competitors have many obstacles to overcome. They must significantly upgrade roads and infrastructure, and guarantee top-notch quality and delivery. And they must liberalize trade policies.
"And there is no small amount of bureaucracy and corruption to deal with in the Indian government," McAlinden said.
Still, no one doubts that Michigan must adapt to new competition from India.
"The 21st-century manufacturing economy in Michigan will be far different than the last century," Gov. Jennifer Granholm said in a recent interview. "I am aware that many analysts say that we will lose more jobs to India and other emerging countries. But we can and will continue to remain essential in the global economy."
You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.
India wants to lure U.S. auto supply jobs
Its bid to become a major global player in parts manufacturing poses a challenge to Michigan companies.
By Louis Aguilar / The Detroit News
Clarence Tabb, Jr. / The Detroit News
After nabbing scores of software engineering and call-center jobs from America, India now wants to become a powerhouse in the $1.1 trillion automotive supply industry.
The Indian government recently served notice it plans to compete globally in the auto industry, beginning with the design and production of automotive components. The country's goal is to grow its fledgling $7 billion auto parts sector by $5 billion a year over the next decade.
Such an expansion could create as many as 3 million jobs and attract nearly $50 billion in investment, according to a study by the consulting group McKinsey & Co. for India's Automotive Component Manufacturers Association.
It would also establish India as a serious competitor to Michigan, which remains the nerve center of the automotive parts industry despite losing 53,000 jobs in the sector since 1999.
For now, India is attracting auto parts jobs on a small scale. In April, for example, Livonia-based Acro Service Corp. helped build a small facility in Pune, India, where a small group of Indian engineers handle design work for a Michigan auto parts supplier.
The Indian engineers perform basic computer-aided design testing and send the results back to their Michigan counterparts, who make 60 percent higher salaries.
Similar work is performed by 25 Indian engineers at General Motors Corp.'s India Science Laboratory in Bangalore, which opened three years ago. They corroborate electronically with GM engineers and designers based in Warren and Europe. Troy-based auto parts maker Delphi Corp. opened a similar facility in Bangalore two years ago.
The Indian government, which successfully targeted information technology and computer programming in the 1990s, now believes auto parts could be its next big opportunity.
Other countries -- including China, Brazil, Slovakia and Vietnam -- have similar ambitions to tap into the emerging Asian and Eastern European auto markets, as well as making headway in North America.
More than half of the $5 billion-a-year projected growth in India's auto parts industry will come at the expense of global competitors, including Michigan-based firms, according to the McKinsey & Co. study.
"You should get used to this because you are going to hear these kinds of goals from China to Eastern Europe," said Sean McAlinden, chief economist and vice president of research for the Center for Automotive Research in Ann Arbor.
Michigan and Midwest auto suppliers are still reeling from the first wave of foreign rivals that began to nab jobs and investment two decades ago. Last year, Mexico, Canada, Japan and Germany accounted for 55 percent of auto parts imported into the United States.
Because of the shift, Michigan has lost 21 percent of its auto supply jobs since 1999, according to the Center for Automotive Research. About 172,000 auto supply jobs remain in Michigan.
About 1 in 5 U.S. auto supply jobs, around 127,000, will vanish by the end of the decade as North American firms close plants and move production to lower-cost regions, according to a study this year by Roland Berger Strategy Consultants in Troy.
India, like many countries, wants to cash in on Eastern European and Far East countries opening their gates to foreign investment. India's auto parts industry currently isn't much of a player in Asia or the United States.
But buoyed by its success in attracting American information technology jobs such as call centers and software design, as well as its proximity to China and other growing auto markets, India believes it's ready to tackle manufacturing.
India also is signaling it will aggressively seek high-skill jobs in the auto industry -- the kinds of jobs Michigan government officials have said they need to retain. India has a population of more than 1 billion people. Every year, Indian universities produce more than 350,000 engineers and nearly 5,000 doctorates.
Analysts remain skeptical that India can become a major player in the global auto industry in just a few years.
"No question, India will be a formidable opponent, but the question is, to who and what market?" said Antonio Benecchi, an auto analyst for Roland Berger Strategy consulting firm.
"The initial expansion will eventually serve the expanding market in India and Asia, which may not mean much job dislocation for American workers. But they can cause more immediate problems for Latin America and other Asian competitors," Benecchi said.
When RV Rao recently heard of India's ambitions, the Indian-American shook his head and smiled as he sat in the Livonia offices of Acro.
"The Indian industry can be quite boastful in their predictions," Rao said. "But there is no question there is going to be significant growth. Will there be dislocation of American workers? Unfortunately, yes. How much dislocation? No one can accurately say."
Rao is head of a new Acro subsidiary that is setting up Indian engineering facilities for automakers and suppliers. He helped establish the Puneshop that opened in April and plans to hire another dozen Indian engineers soon. Next month, Acro plans to open another engineering center in Chennai, India, for a Michigan supplier. All of the work once was performed by American workers.
For more than two decades, Acro concentrated on providing automakers and their suppliers with IT staffing and engineers in the United States. About five years ago, automakers and suppliers began to approach the firm about setting up facilities in India.
Acro intends to serve smaller firms that perform contract work for larger auto supply firms.
It hopes that 25 percent of its business will come from low-level design and engineer work currently done by companies and employees of automakers based in the United States and Europe.
"We are not the trendsetters here," Rao said. "But that is the direction the auto industry and the supply industry have taken, and we are responding."
Acro isn't the only one setting up engineering and design outposts in India.
Major companies such as Sundram Fasteners, Bharat Forge, Sona Koyo Steering and Toyota Kirloskar Auto Parts have either secured contracts or are already supplying to vehicle manufacturers abroad.
DaimlerChrysler AG's Detroit Diesel Corp. subsidiary recently announced it would build an Indian plant to manufacture valves for engines.
Amtek Auto Ltd., an Indian auto supplier that builds connecting rods for GM and Ford Motor Co., raised $69 million selling shares to fund acquisitions and expansion plans.
Amtek Auto last year bought U.K.-based GWK Group, which supplies parts to GM and Ford.
In September, a 30-member delegation from India's Automotive Component Manufacturers Association traveled to Detroit to hold talks with Ford, GM, and Delphi officials. Similar talks are now being held with European automakers and suppliers.
Analysts say India's grandiose ambitions are typical of emerging countries that are rushing to take advantage of globalization.
"The biggest threat may be that India steals so much work from Mexico and China that those countries retool and go after other segments of the American market," McAlinden said.
Analysts contend India and other new competitors have many obstacles to overcome. They must significantly upgrade roads and infrastructure, and guarantee top-notch quality and delivery. And they must liberalize trade policies.
"And there is no small amount of bureaucracy and corruption to deal with in the Indian government," McAlinden said.
Still, no one doubts that Michigan must adapt to new competition from India.
"The 21st-century manufacturing economy in Michigan will be far different than the last century," Gov. Jennifer Granholm said in a recent interview. "I am aware that many analysts say that we will lose more jobs to India and other emerging countries. But we can and will continue to remain essential in the global economy."
You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.
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