SHANGHAI -- American Axle & Manufacturing Holdings, heavily dependent on the collapsing market for light-truck parts in North America, wants to use China as a place to diversify into car parts.

 

Says Steven Proctor, American Axle's Asia president: "We're going to use China to develop expertise in designing and building passenger-car products. Then we're going to use the know-how we've developed here to be competitive in other markets."

 

American Axle, of Detroit, produces drivetrain parts, such as gears, transmission components, transfer case and transmission components, shafts and forged components.

 

The company says SUVs, pickups and commercial trucks account for about 85 percent of its revenues.

 

China has two attractions, says Proctor.

 

First, there is a big pool of talent. "You can find very high-quality engineers here for only $20,000 to $30,000 (137,484 to 206,226 yuan) per year," he says. "The same person in the U.S. will cost you $100,000 to $120,000 (687,420 to 824,904 yuan) without including benefits, which are far higher than in China."

 

Second, there is China's vast market. "Enough new volume is being created here," Proctor said. "We can make new relationships with OEMs to develop products for passenger cars, without necessarily having to displace competitors."

 

This month, American Axle took a step in this direction by signing a deal for a 50-50 joint venture with automaker Anhui Jianghuai Automobile Co. in Hefei, Anhui province.

 

The venture, Hefei AAM Automotive Driveline & Chassis System Co., will use American Axle technology to make axles, power transfer units and suspension modules for passenger cars, multipurpose vehicles and SUVs starting in the first quarter of next year.

 

The venture will supply parts for two passenger cars made by Jianghuai. Hefei AAM will also work with Chery Automobile Co., which has China's best-selling domestic brand.

 

To boost quality, Chery adopted a policy of buying only from global suppliers and their joint ventures for components in selected models. American Axle is one of Chery's new partners.

 

American Axle operates one other China unit: a wholly owned manufacturing plant opened in 2006 in the Yangtze Delta town of Changshu.

 

"We've got a lot of property at Changshu," Proctor says. "Our facility there was designed to be expanded."