Plastic Packaging Products From China

DETROIT (July 27, 2010) — After years of breakneck growth at home, China’s parts makers are starting to reinvent themselves as global suppliers.

No longer content with shipping parts to North America, Chinese suppliers are acquiring U.S. companies and factories, often at bargain prices. In many cases they want to service North American customers — particularly General Motors Co. and Ford Motor Co., which already do business with them in China.

In early July, for example, Tempo International Group, a Beijing supplier of brake, chassis and powertrain components, and its financial backer, the municipality of Beijing, formed a joint venture called Pacific Century Motors to purchase GM’s Nexteer steering components unit for a reported $450 million.

“We want to become a mainstream supplier,” Tempo Chairman Tianbao Zhou said in an interview last week at GM headquarters. “We want to blend in to the American culture.”

Tempo is following in the steps of Wanxiang Group Corp.

In 1969, Lu Guanqiu, a former apprentice blacksmith, launched a farm tool repair shop with his wife, five partners and $500. Later he started producing universal joints for automakers.

Now his Wanxiang Group Corp. generates global sales of $8 billion a year. Wanxiang is in Hangzhou in China’s Zhejiang province, on the eastern coast just south of Shanghai.

In 1994, Lu launched Wanxiang America Corp. in Elgin, Ill. In the late 1990s, the U.S. operation bought five distressed chassis component suppliers, keeping their American management in place.

Lu has continued buying. In 2007, the company purchased a driveshaft operation in Monroe, Mich., from Ford Motor Co.

The company’s U.S. sales totaled $1.3 billion last year. At a recent industry event in Detroit, Wanxiang America President Pin Ni said he would consider other acquisitions of distressed suppliers.

Other Chinese suppliers will follow, says C. Peter Theut, the founder of China Bridge, an Ann Arbor, Mich., consulting firm that helps complete mergers of Chinese and U.S. companies. Over the past year, “We’ve been approached by 12 Chinese companies that want to come West,” Theut says. Six were auto suppliers, he says.

Chinese cash

The Chinese generally seek small U.S. companies with niche products and annual sales of $20 million to $150 million. “The Chinese companies will come in with cash and supply the Americans with resources that they couldn’t get from U.S. lenders,” Theut says.

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