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No. 364, January 2000

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Japanese Companies in the US


METALS AND FABRICATED PRODUCTS

Under what it describes as a policy of "selective consolidation," KOBE STEEL, LTD. signed a letter of intent to sell its half interest in LORAIN TUBULAR CO., LLC to partner USX CORP./U.S. STEEL. The joint venture, which operates two seamless steel pipe mills in Lorain, Ohio, was formed in August 1999 after 10-year-old USS/KOBE STEEL CO. sold its steel bar operations to REPUBLIC TECHNOLOGIES INTERNATIONAL, INC. (see Japan-U.S. Business Report No. 360, September 1999, p. 7). Both Kobe Steel and USX have a 15 percent share in this company. For the record, Kobe Steel said that it wanted to sell its stake in Lorain Tubular because that firm, the steelmaker's only involvement in the pipe business, had no synergies with its other operations. Industry insiders say, however, that questions about the profitability of the steel pipe manufacturer were the deciding factor.

U.S. production of aluminum substrates for computer drives' hard disks is another casualty of KOBE STEEL, LTD.'s "selective consolidation" strategy. Output of this product was due to end in January 2000 at KOBE PRECISION, INC. in Hayward, California. The plant, which the steelmaker acquired in 1988, can produce 7 million substrates a month, making it one of the world's largest suppliers. However, with hard drive manufacturers cramming ever-more capacity on disks, the substrate business has become increasingly difficult. The end of aluminum disk blanks will cost the jobs of roughly 350 of KPI's 450 employees. The remaining people are involved in KPI's silicon wafer reclamation operation. Kobe Precision diversified into this business, which has thrived from the start, in 1996. It now ranks as the top U.S. provider of recycled wafers to the semiconductor industry.

A somewhat defensive KOBE STEEL, LTD. is quick to point out that, these two developments notwithstanding, it is committed to production in the United States. One case in point is PRO-TEC COATING CO., a Leipsic, Ohio hot-dip galvanizing steel sheet joint venture with USX CORP./U.S. STEEL that started up a second galvanizing line in 1998. Another is the expansion planned at KOBELCO METAL POWDER OF AMERICA, INC. This Seymour, Indiana company, which began production in 1989, manufactures pure carbon and low-alloy steel powders used in powder metallurgy and powder forging applications, primarily by the automotive industry. Kobelco Metal Powder currently is operating at capacity, or 4,400 tons a month. A $3 million investment will give the company the ability to produce slightly more than 5,000 tons of steel powders a month. The extra capacity is expected to come onstream in the fall. NISSHO IWAI CORP. and SHINSHO CORP. are minority investors in Kobelco Metal Powder.

CADIC CORP., the developer of a novel process for producing ultrathin-wall stainless steel castings, formed CADIC TECHNOLOGIES INTERNATIONAL, INC. with AMSI, INC. of Dublin, Ohio to market its Cadic Convert Process investment casting technology to the North American foundry industry. The Kawasaki, Kanagawa prefecture company's technology is capable of making stainless steel castings with wall sizes as skinny as 1.8 millimeters. Cadic thinks that one of the main applications for the Cadic Convert Process will be lightweight car and truck exhaust manifolds because the high-temperature requirements of these parts limit the use of gray or ductile iron castings. GENERAL MOTORS CORP. reportedly plans to use Cadic-technology exhaust manifolds on some of its 2001-model- year products.

An exchange rate of ¥103=$1.00 was used in this report. aaa

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