Bosch VS Delphi: Interpretation of Auto Parts Multinational Companies in China

It is an automobile manufacturer that floats on the surface of the water;
Underwater, filled with full, is an auto parts manufacturer.

According to statistics, parts and components account for 60% of the total price of a car. The remaining 40% is the total assembly cost, marketing cost and profit of the vehicle manufacturer.

Therefore, do not look down on these auto parts makers because they are inconspicuous.

Take Delphi Corporation in the United States as an example. There are several things that Delphi does not produce, including car shells, engines, glass, and tires. It is said that these items, together with Delphi's products, can be turned into a complete car.

The company that dares to say this may also include the German Robert Bosch Group because he even moved the engines to the production line.

In the Chinese market, the two companies seem to be proud of each other. The data shows that in 2002, the total sales of the domestic auto parts industry was 75 billion yuan. Among them, Delphi, Denso, Bosch and other world-class component giants accounted for 14% of the market share.

What kind of vision will it be to put together two reticent companies?

Bosch VS Delphi auto giants unconventional interpretation of the Chinese market

Only need to affect 500 people

Into the Hall 3, in addition to familiar car manufacturers such as Volvo, Land Rover, Jaguar, there is a sign that makes most people unfamiliar with - Bosch. In the Bosch booth, various “organs” on the car were filled with everything.

Bosch decided to play big. During the Beijing Auto Show, this auto parts manufacturer from Germany formally announced that it has established a joint venture with Wuxi Weifu Group to establish Bosch Automotive Diesel Systems Co., Ltd., of which Bosch holds 67% of the shares.

Not only that, it is preparing to expand Bosch's professional repair shop to 300 this year, and form a maintenance network of 1,000 after five years. In the past, only the Bosch Group, which was only known to the auto industry, has now been exposed to the public.

However, the 10 galleries that visited the National Exhibition Center did not find another U.S. auto parts company's booth that was in line with Bosch. The company also has a very good face. Its name is Delphi.

Of course, all kinds of data in the Chinese auto market are enough to make all the companies related to the auto industry infatuated. In 2003, the country’s auto sales reached 4.39 million units, an increase of 34.21% year-on-year, of which sales of cars reached 1.97 million, an increase of 75.28% year-on-year. Bosch fixed this fat, and Delphi naturally would not let go. But what is Delphi doing?

Delphi was not idle. At the same time, he announced the establishment of a global knowledge center with the Tsinghua Research Institute and the International Automobile Engineering Society. The purpose was to “train more local Chinese talent and improve local R&D capabilities.” At the end of last year, Delphi established the China Technology Center in Pudong, Shanghai. It is said that the number of R&D personnel in China will reach nearly one-tenth of the total number of R&D personnel in the world.

“Some people are worried about the oversupply in the Chinese market. They are worried whether the market will shrink after undergoing rapid development. Does the government have to adjust its policies? However, just as the American automobile industry experienced a leap in 1900-1910, when the market developed unconventionally, When the speed is in progress, companies can't interpret it in a regular light, otherwise the result can only be losing the market and losing customers, said Chen Jinya, president of Delphi Automotive Systems (China) Investment Co., Ltd., who was interviewed by “Excellence”.

He attributed Delphi's strategic thinking in China to five points: First, to do long-term rather than short-term investment; Second, to have high-tech technology to enter China; Third, to have outstanding talents; Fourth, to establish a broad product customer base; , Formulate and realize the strategic goal of talent globalization and product localization. He said that the establishment of the Global Knowledge Center and the Delphi China Technology Center are in line with Delphi’s strategic thinking.

Coincidentally. Although Bosch has not established a nationwide R&D center in China, it has also started the Suzhou Diesel Technology R&D Center project. Bosch has invested 50 million euros in this project.

All kinds of data indicate that the Chinese market has become a hotbed of profits for the rapid expansion of Bosch and Delphi. In 1993, when Delphi had just entered the Chinese market, sales in China were only 20 million US dollars; in 2003 this figure has become 650 million US dollars, an increase of nearly 50% over 2002. Bosch, which is known to have set up a representative office in Shanghai in 1909, had sales of 1.3 billion euros in China in 2003, which is an increase of 25% over 2002 regardless of exchange rate changes.

From the investment amount of both parties, we can see the importance of the two companies to the Chinese market. According to currently collected data, Delphi’s total investment in China exceeds US$400 million, and Bosch exceeds US$600 million.

In the Chinese market, in addition to domestic auto parts manufacturers, Bosch and Delphi also face competition from other global auto parts giants. "(Bosch) has many very strong opponents, such as Delphi, Denso, etc. It is precisely because of the existence of these competitors that we need to continue to innovate. The auto parts industry, or a customer-driven market, is a The buyer's market, said Peng Deyuan, president of Bosch (China) Investment Co., Ltd.

Compared with Chen Jinya's frequent media interviews, Peng Deyuan rarely appears before the media. They seem to follow the management style of their company's global leader. In the European and American financial circles, Delphi's global CEO Battenberg is a big red man; Bosch's global president, Ferenc Bach, though determined to change the low-profile image in front of the media, has achieved little success so far.

Interestingly, Delphi once said that "it only needs to affect 500 people in China." "If a company can affect 500 people more deeply, this enterprise is very remarkable," said Chen Jinya. "For example, China now has 124 (potential buyers of auto parts), and Delphi offers 30 to 40 of them. Goods, then it will affect the leaders of these thirty or forty companies, which also accounts for one-tenth of the total number of 500 people."

In addition, the Chinese market has gradually become the procurement base of Bosch and Delphi. Among them, Delphi’s purchase volume in China in 2003 was US$225 million, and by 2007 this figure will reach US$1 billion.

Judging from the corporate personality, "Bosch has both the strictness of the Germans and the romance of Europeans, and its innovation in the market is very strong. Nippon Denim inherits the fine style of Japanese products. Delphi is a combination of various cultures. The behind-the-scenes culture of the United States has much in common with Chinese culture and has strong compatibility," said Chen Jinya.

Some experts pointed out that because Delphi is from General Motors, it is better at considering the big picture of the vehicle and the production of auto parts. One of the important trends in the development of the automotive industry is that auto parts manufacturers have begun to dominate the changes in the direction of the entire vehicle.

"A lot of car manufacturers invited us to participate in the vehicle development process." Chen Jinya said, "In the past, a model has led the market for more than a decade and will never be there again in China. Car manufacturers will launch new models every year. Auto parts suppliers must keep pace with them. And whether or not they can keep pace, in the final analysis, they must look at the technological development capabilities of a company. With technological development capabilities in place, you have the ability to walk one step ahead of others."

In the strategic blueprint of Fellenberg, diversity will become a crucial link.

Bosch reviews the cost model

Even in Germany, which is known for its prudence, the low profile of the Robert Bosch Group (hereinafter the Bosch Group) is still intriguing. Although it is the world's largest auto parts manufacturer, few Asians, Europeans, and even Germans know who its president is.

Franz Ferenbach, 55, seems to be determined to overturn this situation. Although he himself does not have a plan to enhance his personal image, there are various indications that he will be more recognized by the public in the next few years.

In July last year, Ferrenbach just took over the handsome seal of the sixth-largest company in Germany (titled the chairman of the management committee), becoming the sixth president since Bosch Group's 118-year history. In 1886, the Robert Bosch Group founded the "Precision Machinery and Electronic Technology Workshop" in Stuttgart, the predecessor of the Bosch Group. With the invention of an ignition system for early cars, the mechanic made the Bosch Group's business across the entire Scandinavian peninsula and expanded into Europe and the world.

Although just one year after taking office, in an interview with the media at the German headquarters, Fellenbach showed a strong desire for performance, especially compared to his five predecessors. If there is no accident, Ferrenbach will have enough time to honor his wishes because all his predecessors have been in office for more than nine years.

Review again

What Ferenbacher had at his disposal was an auto parts kingdom with annual sales revenue of approximately 36 billion euros (equivalent to approximately US$45 billion) and a workforce of more than 230,000. The Bosch Group is also the largest supplier of central heating stoves in Europe and owns 50% of the second largest domestic appliance manufacturer BSH (Bosch Group - Siemens Home Appliances) in Europe. In addition, it also covers industrial equipment, such as packaging machinery and automatic mechanical control systems.

Although it has such a scale and strong industry influence, in most of the time, the Bosch Group has “successfully” avoided the media flashlight. This is largely due to the five predecessors of Ferenbach, who are known for their prudent discretion.

Take Ferenbach’s previous Hermann Schuler as an example. Schuler became president in 1993. In the next ten years, he left the impression of being silent. He only talked about the spirit when talking about engineering technology. After the founder Robert Bosch Group, the most active president was Hans Meckler, who was in office from 1963 to 1984, because of Merkel's management in an autocratic way. He was known as the "godfather." .

In contrast with them is the relatively open Ferenc-Bach, who likes to debate with others. He described his personality as "open and frank" and "aspired to change people's preconceptions and no longer think that the Bosch Group is a conservative, unresponsive company." After becoming president, he graduated from the University of Karlsruhe in Germany in 1975, joined the Bosch Group, and became a member of the management committee in 1999. He promised to increase profitability, one of which is to pay more attention to R&D investment.

In the strategic blueprint of Fellenberg, diversity will become a crucial link. In the past, two-thirds of the company’s sales revenue came from the automotive parts industry, such as spark plugs and brake systems. What Ferenbach has to do in the next 5-10 years is through mergers and acquisitions, which reduces the proportion of auto parts to the company’s total revenue to 50%.

It is internationalization that goes hand in hand with diversity. Although only 30% of the operating income of the Bosch Group came from Germany in 2003, Ferenbach insisted that the Bosch Group should increase its internationalization efforts. He said that after ten years, the proportion of Europe's operating revenue in the Bosch Group will be reduced from the current nearly two-thirds to half; the other half will come from Asia and the Americas.

However, one problem that Ferenbach had to face was the position of Germany in the future development of the Bosch Group. Like many multinational companies in Europe, the Bosch Group is also shifting a considerable part of its production to low-cost countries in order to increase product competitiveness.

In Germany, the Bosch Group has a total of 103,000 employees, most of whom serve in the production process. Fellenbach bluntly stated that the cost of these employees is too high. "In addition to the product itself, we also need to improve the production process... We must become more competitive in terms of cost."

One of the effective ways is to reduce the wages of workers. German workers rank among the world's leading wages, at 28 euros per hour. Fortunately, the high cost of workers is not merely a concern for Feltonbach, but intense discussions are taking place throughout Germany and even in Europe. The results of the discussion clearly made German companies overjoyed. Although the weekly wages of workers were unchanged, the working hours increased from the past 35 hours to 40 hours.

“Our social atmosphere is lazy and lazy, and the Americans are motivated. Our model (35-hour week) is no longer in use and needs to be reviewed again,” said Klaus Zimmermann, chairman of the German Bureau of Economic Research at the Bosch Group. According to relevant data analysis, this will reduce the labor costs of Bosch Group's German factories by 12%.

Accelerate the global pace

In addition to the adjustment of the wages of workers, Ferencbach also hoped that the Schroeder government's tax reform plan to stimulate the economy would inject strength into the development of the Bosch Group. The sluggish domestic demand in Germany has contributed to the poor performance of the Bosch Group in terms of profitability. In 2003, the pre-tax profit of the Bosch Group accounted for approximately 4.5% of sales revenue, which was the third consecutive year at this level, far lower than the 7% set by the Group. Ferrenbach believes that the tax reform plan will be of great benefit to the Bosch Group. Affected by this plan, the sales revenue of the Bosch Group in 2004 will increase by 5%-6%, which will enable the company to achieve a 7% profitability target in 2005.

To achieve this, the Bosch Group still needs to hope for a better-than-average global economy, but at the same time it must speed up its development outside the German market.

Many people think that the Bosch Group is more like a "closed-door" German company, and Fellenbach contends that this is inconsistent with the facts. "Our business in Japan has been operating for 90 years," he said. In 1889, the first overseas office of the Bosch Group was established in the United Kingdom; 11 years later, the Bosch Group established the first overseas factory in the United States. "The Bosch Group itself does not lack the blood of international operations," he said.

In spite of this, he still needs to make big strides in overseas markets, increase investment in countries with good potential, and accelerate the dispatch of senior German managers to other countries. Ferrenbach himself also had overseas work experience. From 1985 to 1989, he served as the vice president of finance and administration of the United States branch.

“The opportunities in the Chinese market are unmatched by other countries. There, we already have several joint ventures, such as diesel injection systems and hydraulic transmission tools. Bosch Group's annual sales in China are close to 1 billion Euros. I foresee that ten years later, this figure will increase by five times." Ferrenbach said, "India also has a very good business prospects. In the past, the Indian economy has always been volatile, and now the Indian government has significantly increased its investment in infrastructure. The new road paving plan means more market opportunities for the automotive-related industry. Now we have annual sales of 350 million euros in India."

The Bosch Group's investment in R&D is unsurpassed, which accounts for 7% of sales revenue. Ferrenbach will obviously follow this tradition. He is particularly concerned with the development of anti-lock braking systems (ABS), centralized heating furnaces, and diesel injection systems. The diesel injection system can reduce the car's oil efficiency and reduce fuel consumption.

It is ESP (Electronic Stability System) that places high expectations on Fellenbach. EPS can make a car not roll over in the event of an accident, thereby minimizing the death toll. However, Ferenbach said that ESP also needs continuous improvement to ensure that it can play its best role in the event of an accident.

"Compared with the past, we must place more emphasis on customer orientation. For example, in the auto parts field, we must provide products and services to different market players in more detail because we must maintain high performance and different auto companies have auto parts. The requirements are also very different."

Until now, Fellenbach still adheres to the traditional values ​​of the Bosch Group, including its unusual organizational structure. The 92% stake in the Bosch Group is controlled by the Robert Bosch Group Foundation, and the other 8% are owned by the Bosch Group family.

However, judging from the actions he has taken, the Bosch Group will undergo major changes in the next few years, including the rapid growth in international business and the competitiveness it maintains due to cost reductions. Of course, it also included Fellenbach's breakthrough in the low-profile fence of his predecessor, and he made more appearances in front of the media and opened his mouth to speak.

The future of Delphi will be "striking" because "the strategy of diversification will become the compass of Delphi."

Delphi imitates Japanese companies

Battenberg rushed forward to the spotlight and could not wait to deliver a message to the media: By next year, more than half of Delphi’s global operating revenue will come from customers outside the General Motors Group. By then, the ratio between General Motors business and non-GM business will be 51-49.

This means that Delphi, who had just arrived from the belly of the General Motors Group five years ago, will usher in a true "broken cord" in 2005.

Pick up half of the country

In May 1999, when Delphi was spin-off, GM's business accounted for about 80% of its total operating revenue. Now that this situation is over, Ford, DaimlerChrysler, Hyundai, and other global automakers have picked up half of Delphi's business.

For this kind of information that can bring good news, Battenberger always hopes to be able to prompt more people to learn as quickly as possible.

His point is obviously different from that of the president of Germany's Bosch Group, Ferenc-Bürschbach. Even when Fellenberg is still making a difference to raise awareness, Battenberg has long been known to European and American media. In the circles of analysts and analysts, the Delphi chairman and chief executive officer was very popular with his bold innovations and sharp comments.

However, they have many similarities in the challenges facing the development of the company. The Bosch Group wants to seek deeper and broader globalization, as does Delphi; the Bosch Group shifts production to low-cost countries and cuts wage costs for workers. Delphi is doing the same thing; the Bosch Group follows traditional diversity and hopes that outside the auto parts field. The products will account for more than half of the future, and Delphi is also increasing its investment in the pharmaceutical and IT industries. They are all trying to avoid the emergence of "one big dominance."

In the auto parts sector, Bosch Group benefited from the strength of the euro in its financial statements. According to the British "Financial Times" report, on the last day of last year's exchange rate of the euro against the US dollar, the privately held Bosch Group has surpassed Delphi and has become the world's largest automotive parts supplier.

Despite this, Delphi barely received any impact. On the contrary, its stock price has remained above US$10 per share for most of the time since January this year; in 2003, Delphi’s stock price has remained free under US$8 for a long time.

There are two main reasons for this phenomenon: First, Delphi's cost-reduction program has achieved significant results; Second, Delphi has more and more demonstrated its advantages as an independent listed company after GM. This advantage is especially obvious when compared with similar companies. For example, in 1994, the US Axle Manufacturing Corporation, which was separated from GM, still has 82% of its business from General Motors; and the fourth largest auto parts manufacturer in the world. Visteon, which was stripped from the Ford Motor Company in 2000, but 76% of its sales revenue comes from Ford Motor.

Quietly acquiring small companies

The cost-reduction plan that had been high hopes for Battenberg began in 2002. In order to compete better with Japanese car companies, Battenberger decided to imitate Japanese companies, reduce the number of suppliers, and eliminate waste in the procurement budget. He hired a Japanese expert from Toyota to focus on reducing costs. At the same time, he also recruited the head of procurement of Honda's North America Division and formed a team of about 40 "engineering cost experts" in the purchasing department.

The purpose of this is not only to reduce the original 4500 suppliers by three quarters within two to three years, but also to select 70-80 suppliers among the remaining quarter suppliers. The core "strategic supplier".

This plan is now near completion. Deciding whether a supplier can become a "strategic supplier" standard is a certain technology provided by this supplier can become an important technology in the Delphi product portfolio.

“Suppliers need to figure out their respective cost structures and reduce them so that they will actually be more competitive,” said Don Lancoul, deputy chairman of Delphi. “Previously, we thought that manufacturing was just our own business. What we bought from suppliers was just a few components, but now we are starting to see suppliers as extensions to the manufacturing process, which is going to go further than previous ideas."

In terms of costs, another message that made Battenberg excited is a double agreement signed by Delphi and the United Auto Workers Union (UAW) not long ago. Under the agreement, Delphi was able to hire auto workers from UAW at wages starting at $14 to $18 per hour; before that, the average wage level for UAW employees within Delphi was $24 per hour, of which senior workers were paid 34 dollars per hour.

According to Delphi’s vice president of human resources, if welfare is added, the labor cost under the new wage system will be reduced to 25 yuan per hour, which is far lower than the current salary system of 60-70 dollars per hour. By May of this year, Delphi had hired 62 workers according to the new payroll system and was prepared to increase to several hundred by the end of the year.

Industry experts point out that this is a good thing for both Delphi and UAW. In the past five years, in order to reduce labor costs, Delphi put a considerable number of job opportunities in low-cost countries. In 1999, Delphi’s “high-wage” staff numbered 60,000. By the end of the year, this figure had been cut in half, leaving only 30,000 people. Among Delphi’s employees, 70% are from countries and regions outside North America.

In addition to reducing costs, Battenberger did not forget the importance of mergers and acquisitions for the development of a company. Unlike other large multinational corporations, most of Delphi’s acquisitions are little known. “The size of the companies we acquired was small, so it didn’t catch people’s attention. This is Delphi’s tradition. As early as 1995-1999, we had 38 acquisitions, but from the media reports, people can't see them at all. "Butenberger said," This is because we already have a broad enough product line. This allows us to set a very high acquisition benchmark, unless the acquisition can bring a 12.5% ​​return on equity and 5% net profit margin, otherwise we will not consider it."

Few people will question Battenberg's management background. He was a Bachelor of Industrial Management from Kettering University, completed an MBA at the University of California, and completed a senior management course at Harvard University. He worked at GM for 37 years. If Delphi didn't break away from GM, he would even work for the same company for a lifetime.

Now, Battenberger is preparing to sculpt Delphi's mark into more fields and expand into a number of nearby industries, such as medical technology and computer technology. Battenberger claims that Delphi invests 6% of its sales revenue into R&D every year. This move "is just to make better use of the company's R&D resources." However, a discerning eye can tell that his ambition obviously does not stop there.

Even radical analysts pointed out that the future of Delphi would be "striking" because "the strategy of diversification will become the compass for Delphi."

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