Originally, Solectron Automotive was a company that supplied circuit board assemblies. But as the outsourcing movement grew the company realized it could supply more than simple assemblies. One thing led to another and Solectron was soon outsourcing system integration. This led to Solectron outsourcing the design and engineering for products and systems. During a 10-year period Solectron was also acquiring engineering resources, manufacturing resources and putting in a strong supply chain to manage the process. “When you look at the business up until early 2000 Solectron had acquired a number of businesses with a lot of pedigree in automotive,” says Brian Antell, president, Micro- Systems business unit, Solectron Automotive. “The first one was a business from NEC that had been making products within NEC for companies like Honda for many years.” But even though it had acquired several top-shelf companies, Solectron was still fragmented and unable as a company to move up the supply chain. Hesitant to stand still, Solectron came up with a plan to advance within the supply chain. Antell sat down with Automotive Industries to discuss the plan and how it will help the company become a Tier One supplier.
Q. What is Solectron’s history in the auto industry?
A. Within Solectron we have a lot of history and expertise and until this point in time we haven’t brought it together as an automotive opus. We decided all this capability was sort of fragmented throughout the organization even though we’ve got a global footprint. So, if the individual capabilities remained as they were we were going to be Tier Two, Tier Three suppliers. So we pulled it all together. The product and the technology together with the manufacturing skills represented an opportunity to move up towards a Tier One and a further opportunity since we feel the Tier Ones are going to move up to mega Tier Ones and have more responsibility on the systems integration side. A vacuum will be created because they won’t have the resources to do what used to do and their new job. We could file in this void because we’ve got the pedigree and the breadth of product to help them manage their supply chain. We would represent the capabilities of many different suppliers and this is the method that we’ve been starting to work on with the Tier Ones.
Q. What are the market sectors you are going after in the auto industry?
A. First of all it’s engines and powertrain. Then we’re looking at safety and security. We’re also looking at comfort and convenience. Finally instrumentation and navigation.
Q. Is it an actual restructuring of the company? Did you move these units together?
A. The answer is that the sales and marketing were pulling those together in centers up to the point that we put together the total capabilities here and in Europe and in Asia. The manufacturing we’re already designated in certain sites because they have QS9000 to be the sites of choice for automotive manufacture. The middle part, the design and engineering we’re working on across the organization and allocating certain groups to the automotive. The structure really stayed the same but we’ve pulled together a market segment team to address automotive.
Q. Will you be able to get economies of scale with this?
A. Yes, we do. For example, let me take our Guadalajara, Mexico, factory. It’s a huge place. Maybe 800,000 sq. ft. It has tremendous buying power. It tends to buy centrally. The automotive will be a subset of this group. So it will have all the benefits of scale from the procurement side and well as from the manufacturing side.
Q. Would you say this is a fairly unique approach to supplying the industry?
A. I think it’s unique in a couple of points. First of all the total capability that we’ve pulled together is unique. We’re very strong, for example, in sensors. We’re very strong in body electronics. We’re very strong in manufacturing. We fully except that we’ve put a lot of strength in a sensor company or a body controller that could sell discrete products. But we see the strength that we have is that we can go to the system and put a lot of these people together and therefore as we supply we can be literally a much more focused supplier to the mega-Tier guys who are looking for someone like us.
Q. You currently work with the Tier Ones and want to work with the mega-Tier Ones as you call them. Do you have a desire to do more work with the OEMs?
A. At this point in time we do work with the OEMs. It’s not clearly OEMs, then system integrators, then subsystem integrators. For example, take our Kavlico brand, they work directly with the OEMs as a Tier One supplier. Other Solectron companies work directly with OEMs. It’s very hard to have a pure structure. I think we could all agree that the general principle is that the OEMs are going to do the marketing, financing and design. Then you are going to have the systems integrators, the big guys coming in and putting all the blocks together. We want to be the people who sell fairly good size systems to them for integrators.
Q. As automakers move toward systems integration and modules can you supply modules as opposed to individual components?
A. We at this point in time are selling both modules and components. In the future we will be selling more modules then components especially where we used to sell a simple sensor. Now we are putting in a special housing and integrating it in a special way. It’s part of their supply chain. It’s easier for them.
Q. Is it also more profitable for you?
A. It gives us the opportunity to make money. It also gives them the opportunity to save money by focusing their requirements on one supplier rather than several.
Q. How has it been received?
A. It’s been received very well. We’ve been very encouraged. So much so we want to tell the world what we’ve been doing and that we are committed to the automotive business. Really when you think of it a lot of people can’t move up the food chain and still focus on what they are doing now. They want to focus on the core competencies that are further up the chain and they are looking for people to help them support the bottom end of that food chain.
Q. Who are some of your major customers?
A. Delphi, GM, DCX are the major ones. We do a lot with people such as Hella and Siemens. So we are dealing with a lot of the Tier Ones and the mega-Tier Ones. Magna, JCI are others.
Q. Where do you see the most growth going forward?
A. Probably electronics, definitely. Telematics and the realitionship between the body electronics and telematics is becoming more and more obvious. Because of electric vehicles or hybrid type vehicles power management or power conversion is very, very important.
Q. We constantly hear about the need for cost cutting in the automotive industry. Does Solectron have a philosophy regarding cost cutting?
A. One of the core philosophies of Solectron has been evolving over the last several years — and it’s been accelerating since the slowdown — has been that you have to be the lowest total cost supplier. And that takes many forms. If you are just doing a straight forward assembly area you’ve got to be in the lowest labor area. But lowest cost also comes from using the right technologies and using the right design. One of the things that we believe with this package is to bring design to the table and the lowest cost manufacturing to the table. This package is not available to many suppliers.