China's dragon roars on
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

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.”

China's automotive industry

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% 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 ten-fold 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.

Asia

Optimism
Elsewhere in the region, optimism continues to grow.

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 semiconductors 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 fuelled 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.

“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% 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.”

Flying high in China

Airbus marked a major achievement in January this year when it handed an A380 over to Emirates Airlines, the 6000 th 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 programme 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.

Consumption drives demand

"With the general awareness of the high pace of investment in China, it is sometimes forgotten that China and its neighbouring countries are home to one third of the world’s population,” says Peter Nilsson, President and

Personal consumption
China and its neighbouring countries are home to one third of the world’s population.

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 harbours, 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 automotive 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 symbolised by the gigantic crane that used to dominate the skyline in the Swedish shipbuilding city of Malmö.”