North and East Asia have experienced mixed fortunes in recent years, yet the area remains the world's most dynamic region, thanks to China's seemingly unstoppable economic growth
The Chinese economic dragon continues to rumble onward, barely deflected from its path by the recession that stalled so many other nations. Having already passed Germany as No 3 in the ranking of the world's largest economies, China is expected by many analysts to leapfrog Japan into second place as early as this year.
That China's economy plowed on through the worst ravages of the global recession is due to a number of factors. One is that China's domestic consumption stayed strong despite the drop in exports. In addition, more than half of China's GDP comes from the less-affected service sector. A massive US$585 billion stimulus package, much of which has been spent on infrastructure improvements, has also played a role.
"All the airports are recently built, and the roads are brand new and pothole-free," says Richard Clayton, Asia Pacific Sales Director, Trelleborg Automotive AVS. "The train stations are next."
As of late 2009 China was the world's largest automobile producer and consumer. With a strong demand and reductions in state-controlled gasoline prices and tax cuts on small cars, sales in 2009 were up some 46 per cent over the previous year, according to Chinese media reports. And there is still considerable room for further growth. China is the world's most populous country, and there are still only about 20 cars for every 1000 people, compared with 800 cars per 1000 people in the United States. The consultancy McKinsey & Company expects China's car market to grow tenfold by 2030.
China has about 120 auto producers, and while the majority are domestic companies, the foreign companies dominate sales.
Volkswagen, which is one of Trelleborg's customers in China, is the market leader and able to sell both the new models available in the West and older models, plus others specifically designed for the Chinese market.
"If you look at the top 10 sellers in China, including the domestic automakers SAIC and FAW, we supply to some of them at present," Clayton says. "But with enhanced business with Nissan and more on the way with General Motors, we will be touching a majority of the top 10 platforms by 2011."
Chinese manufacturers are increasingly becoming quality conscious, meaning that other aspects are becoming more important than price. This puts Trelleborg in a prime position, as the company prides itself on its engineering skills.
A major Chinese OEM turned to Trelleborg recently for an anti-vibration system for its new premium model car, which it hopes will help it compete with German brands.
"It is a complex chassis system, and we will be supplying a total of 44 parts - every part we could have wished for," says Clayton.
Elsewhere in the region, optimism continues to grow. Japan, which saw its exports shrink and domestic spending contract during a tough 2009, will experience a return to growth this year.
"The green shoots of recovery, which have been so much in discussion lately, are now developing well there," says Weng Chong Lee, President Marketing Asia Pacific for Trelleborg Sealing Solutions. "Export orders are returning to strong levels in some Asia Pacific countries and in specific segments like semi-conductors and food processing."
Korea, one of the Asian tiger economies, has shown solid signs of resurgence.
"The weakened Korean won, which is now stable, has fueled manufacturing activity in the automotive sector and also in the thin film transistor-LCD sector," Lee says. "Green energy applications are also seeing increased activity."
New development projects remain buoyant for Trelleborg Sealing Solutions. "Our customers are looking for new products, new applications and new market areas," explains Lee. "These are often ideas they had two or three years ago but never had the time or the resources to look into."
Trelleborg has many exciting challenges ahead in North and East Asia. It is constantly increasing its market share as the region rebounds in certain key sectors.
"Adapting to new customer demands and requirements is the order of the day," says Lee. "This is important to keep in mind as we get back into a growth phase."
On your bike
In the West, people are taking to their bikes in an attempt to get fit and be more environmentally friendly. In the East though, pedal power has always been a major mode of transport. In the greater China area 130 million cycles are produced each year, or 70 per cent of the world's bicycle production. While China concentrates on the low-priced transportation-orientated models for its domestic market, Taiwan specialises in higher priced high-tech models for North America and Europe.
"Bicycles produced here are high-technology machines," says Kevin Lai, General Manager of Trelleborg Sealing Solutions Taiwan. "From the outside it may not appear so, but the cylinders for the bike's suspension contain numerous advanced sealing systems that keep hydraulic fluids in and external matter such as dirt and moisture, out."
Putting people first
Globally 2009 was regarded as a dark year for the automotive industry, but in China the industry boomed. With more than 13 million cars sold, China became the largest automobile market in the world. As a consequence, the Chinese automotive jobs market is smoking hot, with plenty of opportunities emerging. The average turnover rate in 2008 of blue-collar workers was 31 per cent, while the white-collar staff turnover rate was 21 per cent.
In this context, the Trelleborg Automotive manufacturing facility in Wuxi outside Shanghai is a contrast. Here the employee turnover rate decreased from 31 per cent in 2007 to 16 per cent in 2009. In the same period, the average productivity measured as output per hour increased by 14 per cent.
"Many measures have been taken, because people really make the difference here," says Mary Zhou, responsible for human resources at the Wuxi plant.
Here are a few examples showing what has been achieved over the past few years:
- Training hours have increased by 100 per cent in two years to 28 hours per person (2009).
- In terms of career development, 32 people were promoted in 2008-09, and 21 people had the opportunity to rotate their jobs.
- Communications have been reinforced to include goal alignment meetings, monthly employee meetings and annual employee surveys.
- The safety culture has been strengthened with good personal protective equipment and improved workshop ventilation. Accident frequency has decreased from three cases per 100 employees in 2007 to 1.5 cases in 2009.
"We also have teambuilding activities to foster team spirit and ownership, and a family day to improve our employer branding and employees' pride," say Zhou. "We have nice uniforms and a shuttle bus taking people to and from work. We also do symbolic gestures such as acknowledging the birthdays of our employees."
Flying high in China
Airbus marked a major achievement in January this year when it handed an A380 over to Emirates Airlines, the 6000th aircraft ever produced by the company in its 40-year history. This was shortly after Airbus announced that 2009 was a record year during which it delivered 498 aircraft.
Another success for Airbus is the start-up of its assembly line in Tianjin, China. In less than two years, starting from a green field site, the new plant was up and running, delivering 11 aircraft in 2009. This is scheduled to rise to four per month in 2011. The production line is the third for the A320 family, which in 2009 represented 400 of Airbus total production. The Airbus A320 program is also important for Trelleborg Sealing Solutions. To service demand, Trelleborg has recently built a new third production line in China for its aerospace sealing products.
"With the general awareness of the high pace of investment in China, it is sometimes forgotten that China and its neighboring countries are home to one third of the world's population," says Peter Nilsson, President and CEO of Trelleborg. "This means that the demand for products is driven by personal consumption. For Trelleborg, this may entail such items as advanced products and solutions for the food industry and life sciences. Above all, we are involved in the area of infrastructure, including airports and harbors, where we are transferring technology to the region."
North and East Asia is largely dominated by China, where Trelleborg has been very active in recent years establishing new operations. Nilsson emphasises the considerable size of the region and the fact that it has a large number of cities with more than a million inhabitants well dispersed across the map. These factors represent a challenge. At the same time, demand from a large Chinese city can equal that of a medium-sized European country.
"As was the case with many other companies, the Shanghai region offered us a natural foothold," says Nilsson. "From this base, we have expanded toward northern China. Our most recent manufacturing facility in Qingdao, in the growing Shandong province, is located about midway between Shanghai and Beijing. We currently have five wholly owned plants in China and will naturally follow this up with further facilities."
Japan is one of the world's largest economies, but is generally regarded as a difficult market for European countries to penetrate.
"Demand in this country is mainly for high-performance products, and the way for us to penetrate the market and grow is through our niche products," Nilsson says. "Sealing solutions, printing blankets and selected automotive components, including brake shims and advanced vehicle boots, are examples of where we have been particularly successful in the Japanese market. We also have company presence, often another fundamental requirement for conducting business with major Japanese companies in other parts of the world."
The South Korean market is distinguished by such globally successful conglomerates as Samsung and Daewoo. In the global auto-motive business, these are linked to even larger players - Samsung to Renault and Daewoo to General Motors. Trelleborg Automotive has had an established presence in the region since 2003 through a joint venture with the family-owned company KunHwa. Enormous shipyards are an important factor in the country, Nilsson says, and these drive demand for products used in offshore oil and gas extraction.
"FPSO (floating production storage and offloading) vessels, the largest of which are built in South Korea and China, contain our advanced offshore solutions," says Nilsson. "For those of us from southern Sweden, South Korea's world-leading position in the shipbuilding area is symbolized by the gigantic crane that used to dominate the skyline in the Swedish shipbuilding city of Malmö."
This massive piece of equipment is now located in the south of Korea.
"This part of the world presents many possibilities and will continue to be a focus of Trelleborg," says Nilsson. "We rely on our dedicated employees here."
For more information, visit www.trelleborg.com