Chinese Auto Parts Now Top Quality And Taking Market Share

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

China's Rise as Auto-Parts Power Reflects New Manufacturing Edge

• Summary: Not long ago, Chinese auto-parts were known for their poor quality, lack of precision and relatively high prices in comparison to their US and German competitors'. But these days China is turning out much better auto-parts, and now exports more than it imports for its high-growth domestic auto industry. Heavy investment in computer assembly and machinery have taken Chinese manufacturing beyond the simple consumer goods of years past and into 'the entire range of products, from telecom equipment to textiles.' U.S. employment in the auto-parts industry has fallen to about 644,000 in 2004 from about 721,000 in 2002. Delphi Corp., which has plants in China, is in bankruptcy protection, and smaller suppliers are finding it increasingly difficult to compete with China. Meanwhile, rising wages have forced Chinese manufacturers to seek out higher-value products, such as car parts, and increase productivity to reduce reliance on low-cost labor.
• Comment on related stocks/ETFs: As noted in the article, these trends spell ongoing challenges for parts producers such as TRW Automotive (TRW), Clarcor (CLC) and Dura Automotive (DRRA), while makers of high-end factor equipment, such as Rockwell Automation (ROK) and Johnson Controls (JCI) should prosper from the Chinese business.