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FW:[Op-Ed] Detroit's Next Big Threat

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  • Andrew Dawson
    More news from India. Take care, Andrew
    Message 1 of 1 , Dec 5, 2005
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      More news from India. Take care, Andrew

      >>Detroit's Next Big Threat
      >>By Sebastian Mallaby
      >>Monday, December 5, 2005; A21
      >>CHENNAI, India -- The next wave of globalization is swelling here,
      >>in this southern Indian city that was battered by a real wave
      >>during last year's tsunami. This new wave is not about Gap
      >>T-shirts or Dell laptops, the poster children for the light
      >>industries that already have global supply chains. And it is not
      >>about software and/or call centers, the industries for which
      >>India is famous. Instead, this new globalization is about
      >>heavier manufacturing, particularly cars. Detroit's panicking
      >>firms know it.
      >>Cars? They are not what spring to mind when you say "Indian
      >>economic miracle." India's economy has grown at more than 6 percent
      >>per year since market reforms began in 1991. But it has scrambled
      >>the classic transition from agriculture to manufacturing and
      >>then eventually to services. Indian agriculture has indeed
      >>shrunk from 30 percent of output to 22 percent since the reforms
      >>began. But manufacturing has not increased its share. The entire
      >>shift has been to services.
      >>You can see why this is so the moment you arrive in Chennai. On
      >>Saturday the airport was teeming; the roads are always an
      >>exuberant mess; businessmen complain about the creaking
      >>infrastructure. Compare that to Ningbo, a medium-size coastal
      >>Chinese city I visited six months ago, where the roads, airport
      >>and docks are all new and shiny. In the just-in-time
      >>manufacturing culture, delays mean money down the drain. That's
      >>why China is the manufacturing platform for the world -- and
      >>why India, so far, isn't.
      >>Chennai also shows why India succeeds in software and services.
      >>To do software, you don't need a broad infrastructure base; you
      >>need one functional building. I visited Tidel Park, a gleaming
      >>office block here that houses 31 software firms, two-thirds of
      >>which are foreign. There aren't any power cuts here because the
      >>building has its own backup generators. There are no
      >>connectivity worries because it is served by six competing
      >>broadband providers. And it certainly is safe. Tidel Park
      >>boasts 150 guards and a security control room that would not
      >>look out of place on Darth Vader's Death Star.
      >>Chennai's boosters say they've learned some Chinese
      >>lessons. Jayalalithaa, the authoritarian former actress who
      >>leads the state government of Tamil Nadu, has thrown money at
      >>the infrastructure deficit. When government workers went on
      >>strike, Jayalalithaa turned a bit Chinese and arrested thousands
      >>of them. (Although her Bollywood career was based on eye-fluttering
      >>and dance, she makes California's governator look like, well, a
      >>girlie man.) Chennai is also proud of its new Special Economic
      >>Zones, modeled on China's tax-free export hubs. The
      >>promotional literature promises "complete freedom in fixing
      >>working hours" and a chance to "totally eliminate any
      >>unlawful/illegal strikes."
      >>This tough approach may be good for manufacturing investment. But
      >>the main force behind the next globalization wave comes from
      >>something different. Until the reforms of the 1990s, India had
      >>good engineers but lousy manufacturing because high tariff walls
      >>made its firms complacent. But the opening of India's economy has
      >>forced its manufacturers to reinvent themselves.
      >>Chennai's auto-components firms have done this almost manically.
      >>Ten years ago, their brakes and valves were crummy enough to scare
      >>away the international car majors that considered manufacturing
      >>in India. Today, you can't spend an hour with any of the
      >>components firms without hearing about the international
      >>quality certifications they've amassed; the Deming Prize,
      >>awarded for manufacturing excellence by a Japanese committee,
      >>has acquired talismanic status. Much as Chennai's government
      >>leaders look to China, the city's business leaders pepper
      >>their conversation with Japanese management lingo.
      >>The results are dramatic. The TVS Group, the largest of
      >>India's auto-components firms, now exports around a third of
      >>its output -- proof that it meets international standards. The
      >>rival Rane Group reports that it has reduced defects from 10,000
      >>parts per million to 250 and that 28 percent of its engine valves
      >>are now exported. One of the TVS companies, Sundram Fasteners,
      >>has won a General Motors "Supplier of the Year" award five times,
      >>and it supplies 100 percent of GM's radiator caps.
      >>Because Indian car parts are now reliable, international car majors
      >>have reversed their attitude. Ford and Hyundai have opened factories
      >>in Chennai; BMW recently announced that it would follow; Volkswagen
      >>and GM seem interested. Multinational parts makers are arriving,
      >>too, strengthening Chennai's attraction as a hub. Saint-Gobain,
      >>a French glassmaker, has built a brand new production line that
      >>may foretell Chennai's future. It's designed so that the
      >>initial capacity of 500,000 windshields per year can be cheaply
      >>scaled up to 3 million.
      >>In short, Chennai's car industry is reaching critical mass, and
      >>its output is good enough to compensate for dodgy (though
      >>improving) infrastructure. The same story is playing itself
      >>out in India's two other automotive hubs, around Delhi and
      >>Mumbai, and to an even larger extent in Mexico, Thailand
      >>and (yes) China. The McKinsey consultancy projects that the
      >>outsourcing of car parts, relatively limited until now, will
      >>sextuple from $65 billion in 2002 to $375 billion in 2015,
      >>with India's share soaring from around $1 billion to $25 billion.
      >>If you think Detroit is ailing now, wait until you see what's
      >>� 2005 The Washington Post Company
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