The findings are based on interviews with nine "new entrant" OEMs and suppliers: Honda, Mercedes, Mitsubishi, Nissan, Toyota, Brose, Denso, Valeo and Yazaki. In some cases, more than one facility per new entrant was studied. The study was designed to investigate how the new entrants approached the challenges they faced in establishing North American operations.

Key findings include:

• Site selection. Incentives play a key role in luring companies. However, Wujciak says "new entrants must have a business case that is robust enough to support the factory after any initial financial incentives and subsidies end."
• Supplier parts. "Proximity to suppliers has its advantages," says Wujciak, "but supplier parks adjacent to assembly activities can also create tensions, such as wage pressures and worker recruitment conflicts."
• General organizational structure. According to Wujciak, some level of plant autonomy is important so that appropriate plant adaptations and changes can be implemented. "However, some level of integration, coordination and communication with the offshore parent company is equally critical," he points out.
• Management mix. The ratio of expatriate managers to local North American managers varies. There is, however, a consensus that managers' assignments should drive the mix, with some targeted increase in the number of local managers over time.
• Manufacturing philosophy. "New entrants generally appear to operate better if they begin by building established, rather than new products," says Wujciak, "and by starting out with established, rather than new manufacturing processes."

In addition to the key success factors for new foreign entrants in North America, the study also looked at the implications for traditional U.S. companies in North America. According to Wujciak, there are five key implications for domestic players:

• If the problems of the traditional workforce are rooted in the current structure and arrangements of the workplace, and if the new entrants have offered quite different workplaces and gained quite different workforces, it makes sense to change the workplace, rather than simply accepting the legacy workforce as a given.
• State incentives, no matter how lucrative, are temporary, and the new entrants have to develop and pursue business plans that do not rely on incentives. "Traditional companies have survived the incentive-rich period of the new entrants, and that part of the playing field is now rapidly leveling," explains Wujciak.
• Proximity might not be the "unmixed blessing that many once thought it to be," says Wujciak. The handicaps of distance are also less than many expected.
• The traditional domestic industry has much less concern for balancing expatriate and local managers. Tensions between plants and headquarters, while often real, are not complicated to the same degree by language, time and culture differences.
• While conventional wisdom sees "newness" as an unmitigated blessing, it clearly raises numerous challenges. "Most older, traditional operations have in large measure resolved these challenges," claims Wujciak.

"The major lesson that the traditional auto industry should learn from the experiences of these new entrants is that the North American workforce can generate world-class results, and the best tools for accomplishing this are effective recruitment, training and changes in managerial and company cultures," says Maitreya Sims, an OSAT research associate.

"The fact remains that both traditional industry players and new foreign entrants are participating in the same industry and the same national political, economic and business regime going forward," adds Sims. "How they respond to macroeconomic changes in supply and demand today will determine the auto industry's winners and losers tomorrow."