Establishing a Win-Win Partnership - AIAG to Support China Automotive Supply Chain ??????- ????????????????????? Dr.Yilong Chen, General Director – Asia Pacific & Chief Representative in China, AIAG ?????, AIAG ???????? ???????? June 26-27,2006,

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Establishing a Win-Win Partnership -AIAG to
Support China Automotive Supply
Chain??????-????????????????????? Dr.Yilong
Chen, General Director Asia Pacific Chief
Representative in China, AIAG?????, AIAG
???????? ???????? June 26-27,2006, Beijing

2
Agenda ??
I. Industry trend - Global manufacturing
??????-???? II. Opportunity and Challenges for
Chinese automotive industry
???????????? III. Key factors for a successful
global manufacturing and sourcing in China
??????? IV. AIAG member companies requirement
on quality and material management
AIAG?????????????? V. AIAG committed to support
automotive supply chain in China.
AIAG?????????????
3
I. Automotive Industry Trend???????

• Supply base is changing ????????
• GM reduced its 3700 global supply base by 500
  suppliers in 2005.
• ??????3700????????2005????500?
• Ford has announced it will move from 2500 to 800
  suppliers.
• ????????????2500????800?
• Delphi is moving from nearly 4,000 suppliers to
  700 to 900 suppliers in the next few years.
• Delphi???????????4000???????700?900?
• Go Global ???
• Global Manufacturing
• ????
• Global sourcing
• ????
• China auto industry plays more important role
• ?????????

4
China automotive industry Growing fast !
?????????
Vehicle Production Volume in China ??????
Vehicle Vol. (M)
Production volume reached 5.71 M. ??????
571??. Total sales in 2005 reached 5.76
M 2005??????? 576?.
Year
5
?? - ?????????????China Automotive Parts Export
Growing Fast! Great Opportunity Ahead !!

• 1984 5.9M 590???
• 1997 540M 5.4???
• 2003 4.3B 43???
• 2005 15.2B, 75 growth compared to 2004. and
  became the fifth largest auto parts supply to US.
  
• 2005152???, ??2004????75,???????????.
• It is estimated that the annual growth rate of
  auto parts market in China may reach 35 during
  the 11th Five-Year Plan period.
• ???,??11?????????????????????35?????.
• Auto part export may reach 40 B in 2010.
• 2010?????????????400???.

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Challenges ?????

• Cost of raw material increases. ????????
• Industry experiencing generally lower profit
  margins due to tougher competition. ?????????,
  ??????????????
• Lack of innovative, high value components to
  differentiate product
• ????????,?????
• Appreciation of Chinese currency has negatively
  impacted export profits. ?????????????????
• Most auto part suppliers are in small scale.
• ??????????????
• Difficult to meet Quality requirement
• ????????
• Difficult to meet Deliver In Time requirement
• ????????????

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How to realize a sustainable grow?
?????????? How to increase export? ??????
Key Factors ????????? for auto parts suppliers
to get purchase order from their customers
8
GMs Expectation on Suppliers???????????
Supply Chain ???
Quality / Launch ??/ ??
Program Management ????
Current / Future Business ??/????

• Global Logistics Capability to Support Global
  Footprint
• ?????????
• Parts at Station
• on Time ???????
• Logistics Cost ??????

• Flawless Launch
• Execution
• ???????
• Reduce Spills ?????????????
• Reduce Warranty
• ??????
• PPAP on Time ??????????

Launch New Programs _at_ Right Quality, Right
Time, Right Cost ??, ??, ?????????

• Best Landed Cost Globally
• ???????
• Material Cost Target
• ???????
• Sustainable Supplier Footprint
• ?????????
• Effective Supplier
• Alignment
• ????????

.
Corrective actions in the right areas to improve
performance ?????????????????
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FORD Sourcing Objectives ???????????

• Sourcing for Quality To identify low risk
  manufacturing suppliers.???????????????
• Development/Launch To develop Robust Quality
  Operating System through Lean /6 Sigma
  implementation and to Launch suppliers products
  flawlessly through APQP.
• ??/???????? /6 Sigma????????????????,??APQP??
  ????????????
• On-Going Improvement To attain Q1 and to
  continuously eliminate Waste in total Value
  Chain.
• ?????????Q1???????????????

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Must improve Qualirty ?????? Meet ISO/TS
169492000 and get certification by????ISO/TS
169492000????????

• Ford Dec 14, 2006
• General Motors Dec. 14, 2006
• Daimler-Chrysler July 1, 2004
• Renault July 1, 2006
• Peugeot-Lounge July 1, 2004
• TRW July 1, 2006
• Visteon July 1, 2005
• QS-9000 expires
• QS-9000???
• QS-9000 expires at midnight December 14, 2006.
• QS-9000????2006?12?14???.
• Suppliers need to transition from QS to TS ? 6
  months left!
• ??????QS??TS, ??6??.

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ISO/TS 169492000 includeISO/TS 16949 ??

• All the common requirements
• ???????
• The particular requirements for automotive
  industry
• ?????????
• Core tools FMEA, MSA, APQP, PPAP, SPC,
• ???? FMEA, MSA, APQP, PPAP, SPC,
• Customer specific requirements
• ???????
• Special requirements for the parts (dimension,
  etc.)
• ????????(???)
• The requirements of product delivery
• ???????
• The habitual methods of the OEMs
• OEM??????
• General procedure requirements
• ??????
• Requirements of particular process (e.g. heat
  treatment)
• ??????(?????)

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Bottom Line ??

• Sustained improvement at theOEM manufacturing
  and assembly centers
• ?OEM???????????????
• Warranty reduction
• ??????
• Elimination of supplier disruptions
• ????????????
• Significant improvement in delivered part quality
• ??????????????
• Continual quality system improvement
• ?????????

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• Must meet the requirement of
• ???????????
• PPAP (Production Parts Approval Process)

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PPAPs Purpose ??
PPAPs purpose continues to be to provide the
evidence that all customer engineering design
record and specification requirements are
properly understood by the organization and that
the process has the potential to produce product
consistently meeting these requirements during an
actual production run at the quoted production
rate. ???????????????????????????????????????????
??????????????????????????.
Effective Date ????
The PPAP Fourth Edition replaces the Third
Edition effective June 1, 2006 unless otherwise
specified by your customer. ?????????????????2006
?6?1????? ??????????
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• MUST deliver auto parts in time
• ??????
• MMOG / LE (Material Management Operation Guide)
• ????????

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• AIAG is committed
• AIAG ??
• - To support its member Companies needs in
  China.
• ???????????????
• - To support Chinese auto industry to bridge
  its gap in the Chinese supply chain.
• ????????????????

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AIAG Background Information????

• Founded in 1982 by a group of visionary leaders
  from DaimlerChrysler, Ford and GM. Based in
  Detroit. Not-for-Profit organization.
• AIAG ?????????-???????????????????????1982???????
  ?????
• Provide a unique forum to address and resolve
  issues affecting the worldwide automotive supply
  chain.
• ???????????????????????????????????????????????
• Headquartered in the metro Detroit area, its more
  than 1,500 member companies include North
  American, European and Asia-Pacific OEMs and
  suppliers to the automotive industry.
• ???????. ?1,500??????????????????????????????????
  ????

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• AIAG Role AIAG ??
• Develop and publish industry standards and best
  practice implementation guidelines
• ?????????????????????
• Provide education/ training classes and technical
  documents
• ?????????
• Provide AIAG Certification?
• ??AIAG???
• In the area of ????
• Quality (TS 16949 and quality core tools APQP,
  PPAP, SPC, FMEA, MSA,)
• ??(TS16949???????APQP(????????)PPAP(???
  ????)SPC(??????)FMEA(?????????)MSA(??????),
• Material Management (MMOG/LE) ????
• E-Commerce ????
• Engineering Data Exchange ??????
• Occupational Health Safety ????????

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Collaboration between China and AIAG AIAG
??????????

• To deploy best practices and standards of the
  supply chain and to Facilitate seamless delivery
  of Chinese automotive products throughout the
  world
• AIAG ???????????????????????????? ???????????
• World Class Quality. ???????.
• Compliance with regional governmental
  regulations.
• ?????????.
• Improve speed to market. ????????.
• Lower Operational costs. ????.