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SHENZHEN, China/PARIS (Reuters) - Aston Martin's sweeping recall of its high-end sports cars last week raises larger questions about the risk to global automakers of sourcing key parts thousands of miles away in China without implementing adequate quality control measures.
Executives from several major foreign automakers said they either shun Chinese-owned suppliers or help them establish sound production processes and train workers to avoid quality problems.
And some traders in one of China's largest plastics supply hubs told a Reuters reporter during a recent visit that counterfeit plastic material of the kind found in an accelerator pedal supplied to Aston Martin was widespread as manufacturers face increasing cost pressures.
The China Association of Automotive Manufacturers, which represents many of the country's vehicle and parts makers, declined to comment.
The British maker of the exotic sports cars featured in a string of James Bond spy movies was forced last week to recall most of the vehicles it has built since 2007. It discovered Chinese subcontractors were using counterfeit plastic material in parts supplied to Aston Martin.
An spokeswoman for Aston Martin, controlled by Kuwaiti and private equity investors, said on February 7 that the Chinese sub-suppliers of accelerator pedal arms are being replaced "as soon as possible" by a U.K.-based supplier.
The source of Aston Martin's recall "is precisely why we don't procure much in China", especially from Chinese-owned component makers, a China-based senior Toyota Motor Co (7203.T) executive told Reuters. He declined to be named because of the sensitive nature of the issue.
Toyota, which has extensive manufacturing activities in China, buys most critical components from China-based units of Japanese and other global parts producers. In some cases it brings in materials directly from Japan, the Toyota official said.
"There is risk in expanding our procurement reach within China," the official said. "When we do buy from Chinese suppliers, we do so only after starting small with a simpler component and taking time to nurture them."
A Toyota spokeswoman in Tokyo declined to comment on issues related to the Aston Martin recall.
One company aggressively expanding purchases of parts from what it calls "pure Chinese-owned" parts producers is Japan's Nissan Motor Co (7201.T), an affiliate of French automaker Renault SA (RENA.PA).
To prevent the kind of issue Aston Martin has faced with defective accelerator pedals, Nissan routinely sends engineers into supplier factories to reinforce quality control, its purchasing executives and engineers in China have told Reuters.
Nissan declined to comment on the Aston Martin recall and its implications for other carmakers.
Germany's Daimler AG (DAIGn.DE), which holds a minority stake in Aston Martin and operates several joint ventures with Renault-Nissan, said it was not affected by the Aston Martin recall and does not share the British company's Chinese suppliers of accelerator pedals.
Jaguar Land Rover Ltd TAMOJL.UL in the UK said it had "never used" Aston Martin's Chinese suppliers. Now owned by India's Tata Group, JLR was part of Ford Motor Co's (F.N) Premier Automotive Group, along with Aston Martin. Ford sold Aston Martin in 2007 and JLR in 2008.
Even Chinese-owned Covpress, a U.K.-based supplier of pedal assemblies and other parts to automakers including General Motors Co (GM.N), Renault and Jaguar Land Rover, said it avoids manufacturing in China altogether to "allay fears" about supply chain security.
"We buy the tooling to make things over there, but that's it - we don't actually make anything over there," Chief Executive Officer Kit Halliday told Reuters. "There is no product that we have in the U.K. that we would consider making in China."
According to documents filed with the U.S. National Highway Traffic Safety Administration, Aston Martin found that Shenzhen Kexiang Mould Tool Co Ltd, a southern China-based subcontractor that moulds the affected accelerator pedal arms, was using counterfeit DuPont (DD.N) plastic material. The material was supplied by another southern China-based firm, Synthetic Plastic Raw Material Co Ltd of Dongguan, according to the documents.
Kexiang was contracted to mould accelerator pedal arms by a Hong Kong company, Fast Forward Tooling, which in turn was contracted by a U.K.-based manufacturer, Precision Varionic International, according to Aston Martin documents filed with
Plastics supplier DuPont said it is working with Aston Martin to help ensure the material used to manufacture the pedals is genuine DuPont product.
"The best protection that customers and end-users have against counterfeit products and the potential consequences of their use in highly engineered systems is to ensure that they and their supply chains buy only from DuPont and their authorized distributors," it said in a statement.
A Precision Varionic official, Ursula Aldridge, said PVI had no comment. Quality management chief John Penman and manufacturing and purchasing director Roger Osborn did not respond to requests for comment.
Calls to the listed number for Kexiang's small factory in Shenzhen went unanswered. People seen inside the factory during a recent visit by Reuters declined to answer questions.
Zhang Ronghui, a Kexiang factory manager absent from the site but contacted by Reuters on his mobile phone, said he was aware of the recall of Aston Martin parts, but denied any direct involvement with the British carmaker. "We're fine. We don't make things (for Aston Martin). Another company does it," said Zhang, who declined a request for a meeting.
Attempts to contact Fast Forward Tooling and Synthetic Plastic Raw Material weren't successful. A visit to the Hong Kong address for Fast Forward cited in Aston Martin's document found it to be that of a small legal and secretarial firm where the company had registered its business but had no actual presence.
Aston Martin spokeswoman Sarah Calam said the Chinese sub-suppliers Fast Forward and Kexiang are being replaced, with production shifting to the U.K. The automaker will continue working with Precision Varionic.
In the meantime, she said, both Aston Martin and DuPont have sent people to China to directly supervise the production of all pedal arms, including verifying that each bag of DuPont-branded plastic material is genuine.
As a widely practiced protocol, upper-tier suppliers such as Precision Varionic have responsibility to verify the quality of so-called sub-assemblies provided by lower-tier subcontractors, according to Matteo Fini, senior supply chain consultant with IHS Automotive in London.
"The more one goes down the chain, the less transparent and visible the chain becomes," Fini said.
Aston Martin purchasing director Gary Archer told Reuters on February 7 that "supply chain management is a big challenge for all car makers", but said the company has a robust quality-control system to monitor its suppliers.
The carmaker's spokeswoman Calam acknowledged the complicated nature of managing an extensive automotive supply chain. "It does become more difficult when you think we have over 200 tier-one suppliers, and they each have their own networks of suppliers," she said. "Obviously it gets harder to control the tier-three and tier-four (suppliers) down the chain."
The complicated task facing a smaller automaker - particularly one with a reputation for iconic design and high-end performance such as Aston Martin - was on full display during the recent visit by Reuters to a factory operated by southern China subcontractor Kexiang.
Kexiang is located in Bao'an, on the outskirts of the boomtown of Shenzhen, in China's "world factory" industrial belt in the Pearl River delta that churns out a quarter of China's exports.
The company operates a small and shabby ground-floor workshop inside a squat pink-tiled building with dirty windows and exposed electrical wiring on its outer walls.
The factory compound was accessible through an unmanned guard post and a free-swinging gate, though a metal grille to the factory floor was shuttered during China's annual Lunar New Year holiday. Several people inside the building ignored requests for access.
Synthetic Plastic Raw Material, the firm that allegedly provided the counterfeit plastics to Kexiang, couldn't be immediately located in the sprawling Zhangmutou Plastics Logistics City in Dongguan, where it is based. A companies registry search at a Zhangmutou plastics association office unearthed dozens of firms with a similar name in the factory town, which is about an hour's drive from the Kexiang workshop.
Plastics distributors in the area said that counterfeit plastics were available. Three such traders, including Wu Jiarui, whose small family-run shop supplies high-end foreign plastics, said some types of fake DuPont plastics could be about 20 to 40 percent cheaper per ton.
"DuPont is a relatively more expensive brand, but you can replace it with some other materials," said Wu, one of hundreds of plastics suppliers, wholesalers and distributors crammed into a maze of shops in the area, displaying sacks and boxes of plastic pellets in their storefronts.
Reporting by James Pomfret in Shenzhen, Norihiko Shirouzu in Beijing and Laurence Frost in Paris; Additional reporting by Yoko Kubota in Tokyo, Ben Klayman in Detroit, Ed Taylor in Frankfurt and Alice Woodhouse in Hong Kong; Editing by Paul Lienert and Kenneth Maxwell