Foreign-based auto makers shift the industry

Assembling an automobile requires more than 15,000 parts and accessories and entails a complex meshwork of suppliers, engineers, planners and plotters. But the industry is bigger than its car parts. For instance, when Hyundai completed the initial phase of its first U.S. manufacturing plant just south of Montgomery, Ala., in 2002, it was a testament to partnerships. It went above and beyond its goal of 30 percent minority participation, with more than $2.5 million of its $6.8 million budget going to minority-owned electrical, construction, transportation and landscaping firms. Hyundai and other foreign-based car companies are building assembly plants in the United States. Along with domestic car makers, however, they are also building vehicles wholly and partially in other countries. That still leaves an estimated 15.8 million automobiles that were built in the United States in 2005. Production is expected to reach 16.8 million by 2009, which means U.S. automobile manufac­turers will remain a large target for MBEs seeking opportunities.
With the stakes so high, carmakers are presenting some competi­tive challenges to minority suppliers striving to maintain strategic positions in the market. MBEs are increasingly leveraging strategic alliances to grow, but what are foreign-based manufacturers doing to foster an inclusive procurement environment?

Steering diversity front & center
“We ensure that diversity is reflected in every decision, making it a central part of our philosophy, our mission and all our business strategies,” explained Tom Purves, chairman of BMW US Holding Corp.

BMW’s Senior Management Steering Committee for Diversity leads the company’s commitment to inclusive procurement proce­dures and supplier development by setting internal targets, which are regularly monitored by the purchasing staff. In addition, BMW pro­vides opportunities for diverse companies to learn and understand the company’s brand values, further helping minority- and women-owned companies qualify as candidates for sourcing.

But manufacturers are not just seeking minority vendors to pro­vide goods and services directly related to automobiles. Increasingly, there is top-down pressure to seek diversity in all core operations. For instance, Nissan North America’s Corporate Diversity Initiative encour­ages diverse suppliers for marketing, distribution, sales, research and development, design, procurement, administrative support and sales.

Reaching out even further, Nissan recently announced a $35,000 contribution for the U.S. Hispanic Chamber of Commerce’s 2007 annual convention, a business development forum attended by Hispanic business owners from around the nation.

Wide-open road

Globalization is as prevalent in the automobile industry as any arena, forging an agonizingly inconvenient truth for parts suppliers in the United States: Parts manufactured overseas are often cheaper than those made in this country. Mexico, China and Korea and other so-called low-cost countries are providing more parts to car builders in the United States, as well as those located out of America, leaving a gaping hole in the sales goals of parts vendors in this country.

Many parts vendors are trying to become suppliers to foreign-based manufacturers to offset losses, but are finding it difficult because those manufacturers are often already aligned with suppliers in their home markets.

John Miller, vice president of purchasing for Nissan North America, indicated that his company will still purchase the majority of its parts from U.S. suppliers this year because proximity still mat­ters. Many of Nissan’s suppliers have storage facilities within 15 miles of Nissan’s plants. Technology is critical too, according to Miller. Nissan wants its suppliers to stay on top of emerging technolo­gies, but realizes it has an obligation to its vendors as well.

“Our goal is to work closely with the ones we have to improve quality, lower cost and improve delivery,” he said. Once those vehicles are ready to ship, manufacturers encounter another opportunity to advance multiculturalism.

Diversity at closing
Every manufacturer has established objectives to increase minority representation in its dealer networks. Still, minorities own less than 5 percent of domestic dealerships and less than 2 percent of import dealerships. Of 42,714 franchises in the United States, 2,104 are minority-owned.

The National Association of Minority Automobile Dealers in Washington, D.C., is working to increase opportunities for ethnic minorities in the automotive industry, particularly at the dealer­ship level.

According to NAMAD President Damon Lester, the group has formed affiliations with AutoStar and Wachovia to provide more financial options and capitalization choices for current own­ers who want to open new dealerships as well as to those looking to buy existing franchises. He also indicated that NAMAD is working with faith-based organizations to offer car-buying incen­tives to those who buy from minority-owned dealerships.

Manufacturers assure that they are dedicated to evening the playing field.

“Hyundai is committed to diversity at every step in the sup­ply chain,” said Keith Eakins, assistant manager of minority sup­plier development for Hyundai Motor Manufacturing Alabama LLC.

“By facilitating access to Hyundai’s purchasing community and encouraging minority contracting with first tier suppliers, Hyundai has surpassed $128 million spent with certified minority business enterprises.”
“Our involvement is a win-win situation,” he continued. “We learn about potential suppliers and they gain a better understand­ing of how to do business with Hyundai.”

In the end, the benefit of diversifying the supply chain is a no-brainer for all manufacturers.
“By embracing diversity,” concludes BMW’s Purves, “we are harnessing a competitive asset and enriching all the constituencies we serve.”