The Asian Century is nothing new for the Automotive sector. Auto parts maker Futuris is a case study in how one Australian company got it right, through planning, patience and the right strategy.
Futuris Automotive creates automotive interior solutions and components, including steering and pedal systems and airbag modules. It is the biggest automotive manufacturer in Australia, with revenues of about $400 million, and its major customers globally include GM, Ford, Toyota, Chery and Tesla.
Futuris began its move into the Asian Century in 2004, which certainly didn't make it a pioneer, but seems prescient when comparing Australian car production numbers then and now.
"Back in 2004 there were four Australian vehicle manufacturers making 420,000 cars a year," Dexter Clarke, the company's director of corporate affairs, told the Manufacturers' Monthly Leaders' Summit in May.
"Today there are three left and one is on the bones of its bum in Ford, making only 20,000 cars a year. And overall 230,000 cars are made in Australia a year, a reduction of 45 per cent."
Things in the Australian automotive industry haven't gotten better since the May event, held during National Manufacturing Week. Later that month, Ford announced that it would cease manufacturing in Australia in October 2016, news that didn't surprise anybody who follows the industry, though highlighted how important the need to operate globally has become.
"Global supply chains were developing and moving into Asia," explained Clarke of the situation in 2004. "So if you wanted to play in a global supply chain you had to be a part of it."
Seeing the way things were trending, Futuris, a maker of products including car interior parts (seating is their main product), decided to become a part of those global supply chains. The Asian Century is not something new for Futuris - it's "at least" two decades old - but it is critical all the same. In 2004, it was "maybe 10 or 15 years in play" for some automotive companies, said Clarke.
Futuris, who employed 1,200 employees and operated only in Australia at the time, began with research and planning their strategy. There were visits to 180 vehicle producers and suppliers to understand who the competition was. They decided to enter into a joint venture with Chery, which was a smaller player, producing about 70,000 vehicles at the time.
"We developed a strategy not to compete with our bigger global competitors for the top vehicle producers - Shanghai GM, SAIC, the big joint venture businesses in China," explained Clarke.
The company entered a joint venture (70 per cent) with Chery (20) and the city of Wuhu (10). Partnering with a "Rising Tiger" car-maker instead of a bigger company assisted in Futuris being underestimated."
We were able to draw on excellent support from bodies like Austrade and others in the private sector," said Clarke. "And as an Australian company we were flying under the radar. We were not seen as a threat entering Asia by our global competitors, who once described us as a fly they could squash whenever they liked.
"Futuris was also able to go the extra mile, setting up their first Chinese factory in a prefecture that wasn't established as a massive industrial hub.Wuhu, in the Anhui province, is about 350 km inland from Shanghai. The company gained a competitive advantage by looking as far to set up their factory.
Chery now makes 773,000 vehicles a year, so Futuris was able to serve its Asian Century "apprenticeship", as they put it, with a success story, before forming alliances with JAC and Brilliance, and are about to open their first 100 per cent-owned factory in Wuxi.
Building on its apprenticeship, Futuris opened a factory in Rayong, on Thailand's eastern seaboard. As with its experience in China, it was careful to get to know the market and who the potential customers were before doing business. However, in Thailand they were able to capitalise on existing relationships when setting up.
"All of the seating competitors, all of the interior component competitors, we knew who the customers were there - they were people we were used to: GM, Ford, Suzuki," he said. "Not like China where you were exposed to Chery, JAC, Great Wall and 180 people you've never heard of.
"The head of purchasing in Thailand in the region is an ex-Ford Australia employee. We know him. It makes the conversation very, very easy. And they will look after you as an Australian company."
A number of articles have been written about Futuris's successful move into Thailand, outgrowing its factory, opening one next door and outgrowing it, and aiming to open a new factory by the end of next year to keep up with demand.
The potential to grow in Thailand is large for those in the automotive sector, with the country expected to be producing three million cars by 2016. However, like every other market, Clarke stresses that it's very different in terms of scale, margins and many other regards to China.
Like Futuris did, it's essential to put in research time before entering any new market. And, as Futuris and many other companies have learned, there will be disappointments.
Nearly every agreement reached in their original JV was broken, said Clarke, and many of the anecdotal horror stories he'd heard turned out to be true. Non-compete clauses, guaranteed margins and intellectual property were not honoured. But also to be considered is the cost of doing nothing.
"If you want to give up, you can walk away and that's the easiest thing to do, or you can work through all your issues and eventually be successful," said Clarke.
Futuris, owned by agribusiness company Elders, has been up for sale since August last year. Despite the success stories, there have been difficulties, such as a $166.5 million write-down for the company in Elders' half-year results last month.
The Ford decision to cease making cars in Australia in 2016 is of massive concern for the parts maker, and it has been reported that Ford Australia makes up about 25 per cent of Futuris' s global sales. As highlighted earlier, the company has been spending the last decade adapting to the weakening Australian car industry.
And that brings us back to weighing up the cost of doing nothing in terms of the Asian Century, which is not something on the horizon, but already here."The last point I want to make is we are not the only country trying to benefit from the Asian Century," Clarke said.
"Everybody else is there. When you are competing for business in Asia, you are not competing against the little factory run by a mum and pop down the street, kicking chickens out of the way as you walk through the front gate anymore.
"You are competing against the biggest multinationals in the world. They are all there and they are all hungry. And they have all the resources at hand too, to exploit that. So you have to be innovative, you have to be different, you have to be prepared to go the extra mile and outsmart them: something that Australians are very, very good at doing in business on a global scale."