Despite the fact that those who know me well often believe I talk too much, I do spend a great deal of time listening — and listening carefully. I listen to what is not said as much as to what is being said. I listen to how the speaker is speaking and not just about the intended context of the message. I pay attention to the little messages and not just the over-arching message they intend for me to hear. The same is true when it comes to reading. Particularly when reading news coverage — reporting as well as analysis — there are little gems embedded in a story, an item that is not central to the story but that tells a story of its own in its own specific context.
In the March 9 issue of The Greensheet, our sister publication, we did a report of the fourth-quarter numbers out of Long Island City, NY-based Standard Motor Products (SMP). The company reported that temperature control sales had fallen, while engine management sales were up. And, in explaining what may have been behind the numbers — as management must and will do at quarterly reporting time — SMP chairman and CEO Larry Sills touched upon a number of factors that helped generate the numbers. Among those factors was China.
In regard to China, Sills said on that March 6 conference call that China is a competitor more in temperature control than in engine management because engine management is more high tech and has more part numbers. “This is not a new phenomena. Temperature control products have been coming out of China for many years,” he told analysts on the conference call. But the intriguing comment for me came in the next part of his comments.
“In the past, several of our customers have attempted to [source direct from China],” Sills said. “Frankly, in a year or two, they decided to come back because they have come to the conclusion that issues of long lead times, returns and all this stuff tends to eat up all the potential savings.” And, over the years, that seems to be the trajectory the China connection has taken in general, and certainly in many segments of the aftermarket.
Back in the early days of the millennium, with a clear economic advantage in procuring product from China, many U.S. companies ran gleefully toward the east for goods, from tire valves to dog food to auto parts. Even some folks along the distribution portion of the channel decided to buy direct themselves, and manufacturers decided to abdicate their responsibilities to Chinese producers who may or may not have held to high standards in regard to product quality and safety.
The mistaken early impression was that U.S. companies were not responsible if the quality was lacking, an assumption that was clearly opposite of legal requisite — and that became abundantly clear when tire valve failures caused safety issues and people’s dogs and cats were dying from tainted pet food.
On the coattails of those liability issues came slow but steady economic shifts that began to close the simple price-of-goods-purchased advantage the Chinese enjoyed earlier in the decade. The Chinese middle class grew and began to expect more — more wages, better air and water, improved working conditions. And that procurement pricing gap was not what it used to be.
As Larry Sills of SMP pointed out, the China connection — though still very viable for many manufacturers and suppliers both inside and outside our industry — is not the pot of gold and easy money that many have thought it would be, especially in procuring product.
It’s nice to know that quality is what gets the job done, especially in regard to aftermarket product — and especially in regard to the overall safety and convenience American consumers expect.
Gary A. Molinaro, Editor/Publisher