But Tsuha hasn't left it at that. He's also built in redundancy at the plant-manager level. Says Rainwater, "We see our customers as often as three times a week." Adds Pete Grim, who manages Saturn's plant in Rochester Hills, Mich., "We have to have a lot of on-site visibility at our customers' plants. Otherwise, they don't think we're serious about having an impact on their business."
Saturn showed it was serious two years ago, when the automakers promulgated quality standards, dubbed QS 9000, that they expected their suppliers to meet by the end of 1997. Saturn has already qualified three of its plants, and Tsuha wants all eight to be in compliance by the end of 1996--a year ahead of schedule. Tsuha says that by being so close to its customers, Saturn knows what's "on their wish list" and from that can seize the design initiative.
One proprietary product made real from a customer's wish list rests on the conference-room table in front of Rainwater. It's a small mechanical device called a direct-drive vent-window actuator. In plain English, it opens the rear window on a minivan. Alongside Saturn's actuator sits the Japanese part it recently displaced, which comes as two pieces connected by a cable. "Our actuator is a third the weight and half the cost. It's also easier to install, which saves money," notes Rainwater.
Less apparent is the fact that Saturn's actuator represents two years of research and development and a significant investment--with no guarantee that the customer would buy the product. To close the sale, Rainwater's division went the final mile by developing--at an additional cost of $100,000--a computerized "sound map" that tests parts for quietness, ensuring that they fall below a certain noise threshold. "We initiated that on our own," says Rainwater.
Saturn had met the customer's unspoken need. Rainwater says the customer (which wants to remain anonymous for competitive reasons) saw not just the elegance and the economy of the part but also the value added by the sound map. No other supplier had taken the initiative to test for noise to that extent. But as Rainwater explains, "Noise is a big issue with our customers. They tell us that all the time." The company is already at work on the next-generation product, while the customer is now interested in having Saturn design other parts it can test on the sound map.
2.
Global Expansion: Going Far to Stay Close
saturn is a global supplier, with joint ventures in China and Europe. It has five plants in Michigan, one in Mississippi, one in North Carolina, and a maquilladora operation in Mexico. It has a technology agreement with an Italian company. And soon it is likely to have capacity in Southeast Asia, ready to feed parts to the Big Three in that booming corner of the world.
Despite Saturn's geographic sprawl, Tsuha's genius is his ability to narrow his scope of concern. According to Tsou, "Wally has an uncanny ability to see what is important for his business and what it takes to get where he needs to go. He doesn't compromise." Tsuha holds every plan to one ironbound standard: Will it increase Saturn's value in the eyes of its tough carmaking customers?
Tsuha recognized the need to do business on a global scale some years back, when he discerned the coming devolution of the auto business. The industry was rapidly junking the vertical-integration model championed by Alfred P. Sloan and made real by Henry Ford. Today the Big Three are outsourcing work they once controlled in-house. Design, engineering, testing, and quality assurance have fallen ever more on the shoulders of suppliers that have to be everywhere the customer is--or plans to be.
Automakers pay hourly labor rates in the United States that are as much as 20 times greater than those paid in Mexico. Their primary access to low-cost labor is through their suppliers. Meanwhile, developing countries with burgeoning populations have a single concern--creating jobs. If they're going to open their markets to foreign manufacturers, they insist that a certain percentage of each car comprise "local content"--parts that are made in the country where the car is assembled.
Tsuha grasped those trends back when Saturn had less than $20 million in revenues and had only recently turned from selling engineering services to manufacturing. In 1991 he made a first modest move, acquiring Beta Manufacturing, an ailing manufacturer of electromechanical switches. Beta was a turnaround, with just $8 million in annual sales. But Tsuha saw leverage in the deal: Beta had plants in Mississippi and Mexico. "That gave us low-cost labor," he recalls.
By then Tsuha was already thinking well beyond his own hemisphere. In the old days, when American companies ruled the world market, they could afford to manufacture in the United States and ship anywhere. That model had been turned on its head by global just-in-time competition, which has rendered shipping, stocking, and replacing inventories over great distances inefficient. To sell at a profit in a local market, you have to be there. Learning that his biggest customer, Chrysler, was entering China, and knowing that Asian economies would continue to grow at a rapid clip, Tsuha knew he had to have his hand in China too.
It took him three years to find the right deal, but in 1994 Saturn formed Beijing Saturn, a joint venture with the Beinei Group, China's largest engine manufacturer. When Tsuha talks about China, it's hard at first to understand his sense of urgency. "There's no infrastructure there," he says. "People can't afford cars. They buy appliances first."
But later he ticks off the less obvious upside to landing in China early. "Beinei is a captive customer," Tsuha explains. "And we have early access to the Chinese market, so we should be able to broaden our customer base in Asia. We can source additional products to the Big Three in China. And we can export back to the United States."
A similar fly-in-the-face-of-the-odds dynamic occurred when it came to setting up a factory in China. In 1995 Tsuha invested in a new, state-of-the-art plant run by local managers who had previous experience in the U.S. auto business. There was plenty of capacity available that could have been had for a song. But Tsuha saw the $2.5-million, Western-style plant as a long-range investment--a loss leader that would run below breakeven for the next five years. Its $750,000 assembly line was built and tested in the United States and then taken apart, shipped, and reassembled in China. "The plant is going to attract Western customers because all the other factories in China are 25 years behind the times," he says.
He's sure it will increase his business with the Big Three.
3.
Making Acquisitions: Growth with a Clear Goal
Wally Tsuha not only has to expand Saturn's global presence; he also has to conquer more of the car.
