Dana:Meeting the local customers’ requirements is our mission

Despite slowdown in market growth rates, China is still home to the world's largest number of automobile consumers, something which multinational enterprises must still pay attention to. How to succeed in a fiercely competitive market is still a key concern for these companies. Dana is no exception. In order to gain a better understanding of the company's financial situation, competitive state and its development plans for China, Gasgoo.com (Chinese) interviewed the President of Dana Holding Corporation's Asia-Pacific branch, Robert Pyle.

Gasgoo: In 2011, Dana's net sales totaled about $7.6 billion, an increase of 24.3 percent. Net profit, meanwhile, soared to $220 million. Have those figures met Dana's goals?

Robert Pyle: First of all, we were very pleased with our performance last year. 7.6 billion was basically in line with our expectations. We were also happy with the profitability of our company last year. We attribute our performance to a number of factors, the biggest being our considerable investment in research and development for our new technologies and bringing some new products to market, as well as expanding our global footprint, which better helps us support customers in key growth markets, for example, Asia.

Gasgoo: What are some of the other achievements you made in 2011?

Robert Pyle: In 2011, we had a number of key launches for customers around the world that helped drive our growth. These covered all of our product groups. There were a lot of important launches in places like Thailand. We're really seeing growth all around the world, as we grow our products with new customers. We are also introducing new technologies, including the Diamond series driveshaft and battery cooling products for electric vehicles.

Gasgoo: More and more international auto part companies are focusing on Asia-Pacific, and China specifically, for their future growth. What goals do you have for the region and the country?

Robert Pyle: China has now become the number one automotive market in the world by sales. There isn't anyone who is not looking to China and Asia-Pacific to drive the growth of their companies for the future. Dana is no exception to that; we are very focused on the Asia-Pacific region in general and China specifically. In 2010, sales in Asia-Pacific did account for about 12 percent of total global sales. However, when we look at our sales, we like to include the market impact of all of our companies, whether we consolidate those sales or not. For example, we look at our DDAC joint venture. We don't consolidate those sales in Dana's global total, but when we look at market impact, we include them. When you look at all of the businesses we have in Asia, in total, they account for 20 percent of Dana's global sales. That's certainly better than the 12 percent we talked about. As we look forward, we'd like to see a higher percentage of Dana's sales come from Asia-Pacific.

I think maybe even more important is how we intend to increase our sales and our share in the China market, as well as in Asia. A very important part of our strategy is investing in technical and engineering resources in both China and India, which today are the two biggest growth markets in Asia. We have a new technical center in Wuxi, which is completing construction later this year, as well as other technical centers in China and in Maharashtra state in India. They are really great indications that not only do we plan to sell products to customers in these important growth markets, but we also plan to design products for them. We think that's a strategy that not only demonstrates our commitment to the region, but also demonstrates our commitment to providing customers with unique products that they need so they can be more successful.

Gasgoo: What advantages does Dana offer over its competitors in China?

Robert Pyle: That's a really good question. Obviously the China market is extremely competitive. You not only have global multinational automotive suppliers like Dana, but you also increasingly compete with local competitors in the China market, who typically haven't had the best technology, but have had very low costs. We're competing with both. The trick to being successful is making sure you're not squeezed in between the two. What we think our advantages include the fact that we are a more than a hundred-year old company, with a history of delivering products to the automotive market that are both innovative and cost-effective for our customers. If you think about it, we've been designing, developing, engineering and selling products in the global automotive industry for over 100 years. There aren't many companies who can say that. Secondly, we'll make sure that we're bringing over not only world-class technology to Asian markets, but that we're also investing to ensure that we can develop products targeted specifically for these markets. We will try to combine the best of both worlds: the global technology capability and global experience that we have, along with the local design and development teams that can get products absolutely right for this market. If we do that better than our competitors, then we'll win.

The key is making sure that we have really strong relationships with our customers, so we understand their needs really well, and the ability to develop and deliver products that meet those needs better than our competitors. That's why we're investing in the technical centers and expanding our teams; to make sure that we're successful.

Gasgoo: Price is another important factor for OEMs in China. Can you tell us more about Dana's cost control?

Robert Pyle: This is a very important part of being successful in China. If we were to come here only with top-end products, we would really limit our share of the market that we can serve. This again is part of the strategy for making sure that we're designing products specifically for the local market, whether it's for passenger, commercial or off-highway vehicles. All three of those segments of the market require cost competitive products. We think the best way to do that ultimately is to design in the market that we're serving. That goes back to our technical center strategy. The other thing that we're doing is we're always making sure that we're reducing our costs in line with customer expectations and making sure that we're as competitive as we can be in China, and the rest of the Asia region as well.

Gasgoo: What measures is Dana taking to maintain its competitive advantages in China over the long-term?

Robert Pyle: For long-term leadership in China, you have to differentiate yourself from the competition. One of the things that we want to make sure is that our products do meet the needs specifically of our customers that are unique to China. Our work includes: designing for the local market; having a staff of employees who are experienced and knowledgeable about our light, commercial and off-highway vehicle customers; having good partners, because some of our assets here in China are joint ventures. We're partnered with outstanding companies like Dongfeng and Yulon Group. Also important is having the right strategy and very good execution. From a cost control standpoint, we not only have to worry about our own costs, but we have to have a very good network of suppliers. Like other suppliers, we don't make everything. We buy something from suppliers. Therefore having a network of capable high-quality, cost competitive suppliers is also very important.

Gasgoo: According to our resources, lightweight cars account for 59 percent of Dana's total global business, while commercial and off-highway vehicles make up 22 percent and 19 percent, respectively. What is the ratio between those segments in China?

Robert Pyle: If you look at the markets themselves, they largely follow those percentages. If you look at light vehicle sales compared to commercial vehicle sales, light vehicles is the biggest market segment. What's interesting about Dana is that our sales in China have typically been more focused on light and off-highway vehicles, but now with our increased stake in our DDAC joint venture last year, we're very focused on commercial vehicles, as well. What we see going forward is maintaining a good balance between those three different market segments. We're investing to design and develop products in all three of those segments for our customers in China.

Gasgoo: Can you tell us more about how the DDAC joint venture will play into Dana's strategy?

Robert Pyle: DDAC was a very important strategic investment for Dana. Dongfeng is a true leader in the commercial vehicle market in China. They have plans to continue to strengthen their leadership and broaden their market scope. We view them as an absolutely outstanding partner. We're very pleased to be partnered with Dongfeng. We will most certainly be focused on the commercial vehicle market moving forward.

That being said, off-highway remains extremely important to Dana. A big piece of our investment in our technical center in Wuxi is specifically targeted to support the off-highway market. We will continue to strengthen our position in light vehicles, the largest segment of the market in China, as well.

Gasgoo: What is the current state of Dana's Wuxi technical center?

Robert Pyle: Just like with our other technical centers, our plan is to have Wuxi be fully integrated into the global Dana product development system. However, it will be principally focused on developing products for the China market. We'll be able to take existing technologies that have been developed elsewhere and adapt them to the China market. We will be able to do a full slate of testing for customers in China. The ultimate goal is to design and develop products there specifically for the China market, and perhaps in the future do proper research and development there, as well. Traditionally, China has been more of an importer of technologies for its automotive market, but going forward, China will be a development center for technologies that will then go abroad. We want to be part of that. We can't really announce specific plans for additional technical centers or new innovations for China. It's always been our mission to locate technical expertise close to the OEMs that we serve. Like I said, that's really the key to being successful.

Gasgoo: What role will the Wuxi technical center play in Dana's global strategy?

Robert Pyle: We plan to have Wuxi be fully integrated in to the global product development system. This is an example where, between North America, Europe and Asia, we can basically be engineering products 24 hours a day for the same customer. We have the calibration capabilities to have Asia work with North America and Europe on the same projects. Initially, the focus will be on applications engineering and testing. That's taking existing technologies, applying them to the local market, and testing products that we design here for customers. On a go forward basis, our vision is to design new technologies and new products in China specifically for the local market. Like I said, innovations that happen in China will be able to be brought outside of China to the rest of the world in the future.

Gasgoo: What innovations is Dana making in the field of new energy vehicles?

Robert Pyle: On the subject of electric and hybrid vehicles, we're most actively focused on battery cooling right now, because that's a really important need for customers. We've worked on both liquid and air cooled options for OEMs to cool the battery or series of batteries in electric vehicles. We're also continuing to develop new technologies for automakers focused on fuel cells. Our battery cooling technology has been featured on 16 different electric and hybrid vehicle platforms, including the Chevy Volt, Ford Focus, Ford Transit Connect, and Tesla Roadster. As we look to other areas of investment to support our OEM customers, the focus will be on lightweight and sustainable materials, aluminum driveshafts and so on.

Gasgoo: What challenges do new energy vehicles face in gaining mainstream acceptance in China?

Robert Pyle: The challenges for electric vehicles that OEMs and we our trying to work on to help get electric vehicles accepted by the consumer include the range of the vehicle, meaning how far you can drive it before the charge runs out. The second key challenge is how long it takes to charge the vehicle after the battery has run out. The third is the cost, because usually there is a significant cost premium between petrol or diesel vehicles and electric vehicles. The fourth challenge is having the infrastructure available. That includes having someone, whether it’s the government or consortiums invest in charging stations to promote the use of electric vehicles. Some of them are designed to be charged at home, but for a lot of them you'll need charging stations, either at gas stations or other places. Those are some of the things that the electric vehicle industry has to face.

Gasgoo: Finally, what expectations do you have for the China market?

 We're very optimistic about the China market. The growth over the last several years has been extraordinary. The auto industry hasn't seen anything like it before and may never see anything like it again. As the China market has become the number one market in the world, of course the percentages for year-on-year growth will become smaller. We will also continue to have ups and downs in the market, because it's a cyclical industry. However, if you look at the demographics of China and vehicle ownership percentage, there is still room for a lot more growth. The other thing that's interesting is that the infrastructure is quite good to support growth in vehicle sales, but the challenges that we will face are things like fuel availability and environmental impact. All of those considerations speak very well toward growth rates for electric, hybrid and fuel cell vehicles for the future. All of those factors together are very interesting.

We're very optimistic about China. We've invested quite a bit in the market, and we will continue to invest to support our customers and grow our business.