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Rockwell positions investment
By Wang Yu (China Business Weekly)
Updated: 2004-03-01 17:38

As China's automotive sector drives forward at astonishing speed, automation providers focusing on the market are also joining the race to stoke and rationalize the development of the heated industry.

And Rockwell Automation, one of the global providers of industrial automation power, control and information solutions, resolves to lead the competition.

Rockwell positions investment
John Cohn, Rockwell's senior vice-president of strategic development.
"Our management recognized that it is a fast-growing market with 4 million cars being rolled off the assembly line in China last year. We believe that it is a market where we have to position ourselves now for the future,'' John Cohn, Rockwell's senior vice-president of strategic development, said.

"It means understanding the local requirements. And as a result (of the understanding), we have put an aggressive expansion plan in place with the objective of serving our customers in the market.''

According to Mike Kluiber, the firm's another senior vice-president in charge of global automation, it is an interesting and sensitive time to enter China, because such investment is moving China from low automation to high automation.

"It is a very interesting time because this high automation is happening for two reasons,'' Kluiber said.

"One is quality, where we must have the information and the ability to merit equipment.

"The second and perhaps the most important one, is that we are seeing production capacity increase by four to five times with this investment.''

Competitive edge

To compete effectively with archrivals such as Siemens and ABB, Rockwell has spared no effort in developing the world's leading architecture for control and information, which represents hundreds of millions of dollars of technical investment over the last decade.

Rockwell positions investment
Mike Kluiber
The money Rockwell poured into the auto sector was based on the prediction that customers would require automation expertise and solutions, Kluiber said.

The automation know-how includes both world class machine controls and the ability to get information from the factory floor to the enterprise management system without spending a lot of money.

"Fortunately our prediction about manufacturing controls and information is coming true on a worldwide basis, even in China,'' Kluiber stressed.

"As a result, our global business is growing, and Rockwell Automation finds itself uniquely positioned in the automotive market as a control supplier and information supplier.''

In Germany where Rockwell's competitor Siemens is headquartered, Rockwell has been selected as control supplier in some cases. And at other times, Rockwell has been picked up as the information supplier, even though the control was being undertaken by Siemens.

"As a result, we are able to address both areas and our global markets continue to grow,'' Kluiber said.

China strategy

"What about China? We suppose that our visit this time is extremely important from a timing perspective, as you all know, much investment is going into China's automotive industry.''

Agreeing with Kluiber, Cohn said an automation provider could not talk about the world market today without mentioning China.

"We have identified the key industries here, with the automotive sector being a particular one that deserves our special attention,'' he said.

Cohn said Rockwell's willingness to build a partnership with China made it unique.

"This partnership may come in the form of sales collaboration, brand labelling relationships, strategic relationships with joint ventures or even acquisitions,'' he said.

"If we find firms which we can support, we will be interested in acquiring them.''

The automotive automation market consists of what people refer to as end users and original equipment manufacturers or large car companies. There are also suppliers to the large carmakers in terms of machinery. The market also consists of tier one suppliers, those who supply machinery builders with parts.

"When we look at an automotive company, we look at the totality of the supply chain,'' Kluiber said.

"There is one point to be made in China that is different from other markets -- there are a number of joint venture partners.

"We need to make it crystal clear that in China we consider the local partners as key elements of our strategy, and that we are as much positioned ourselves for indigenous business as we are for multinationals.''

Rockwell positions investment
Chinese work at a production plant in Guangzhou of South China's Guangdong Province.[newsphoto]
No overheating

Car plants are nowadays sprouting up across the country. General Motors Corp, Volkswagen AG and Toyota Motor Corp are among those who have pumped billions of dollars into car making in China, sparking fears of a glut that could hit profit margins.

So is there a potential overheating or overcapacity problem for the local automotive industry? When confronted with the question, Kluiber was optimistic.

"No, I do not think so,'' he replied.

"There is a small percentage of that population that owns an automobile. Also, there are significant investments taking place that can be applied to meet China's domestic usage and exports.

"Therefore, we must take a long-term view towards the Chinese market.

"Also, we are in the phase of small absolute numbers, percentage increases will be very high. But as absolute numbers grow larger, the percentage of increases will decline.''

Backing Kluiber's view, some analysts and other industrial automation software and solutions providers focused on the automotive segment even claimed that automation products and solutions may help ease the overheating pressure by trimming costs and enhancing quality.

"Since the cost of making cars in China is higher than that in overseas markets, the introduction of cost-saving automation products may be necessary for China's auto sector to trim costs and enhance efficiency,'' said Paul Coughlin, managing director of Standard & Poor's Asia Pacific corporate and government ratings.

"Efforts from both the government to reshuffle the industry and auto makers themselves to lower costs and enhance quality by adopting performance-boosting automation products can take function to rationalize the market sector,'' Coughlin said.

Even if China's domestic car consumption loses its steam as a result of heated competition and less robust market demand, it can still push forward by relying on exports.

James Hatcher, marketing director of QAD Asia-Pacific, said: "We do not foresee an immediate overcapacity danger within the Chinese auto market. Even if it occurs some day in the future, the sector can still develop by exporting auto parts to foreign markets.''

QAD is another United States-based industrial automation provider.



 
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