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No. 356, May 1999

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Japanese Companies in the US


TRANSPORTATION EQUIPMENT

To signify their closer ties, SUZUKI MOTOR CORP. acquired over a period of weeks 500,000 shares of GENERAL MOTORS CORP. stock at a total cost of $37.5 million. It now owns 0.07 percent of the automotive giant. Last fall, GM said that it was banking on Japan's top manufacturer of minivehicles for help in designing and developing small, affordable and rugged vehicles for developing countries. The two companies also outlined several other areas where they might cooperate (see Japan-U.S. Business Report No. 349, October 1998, p. 29). At the time, the world's largest vehicle producer said that it would spend in excess of $300 million to expand its stake in Suzuki to 10 percent from the 3.3 percent it had owned since 1981.

In the strongest acknowledgement to date that no single automotive manufacturer has the financial and personnel resources to quickly resolve on its own the technical problems standing in the way of environmentally friendly but affordable and convenient vehicles, TOYOTA MOTOR CORP. and GENERAL MOTORS CORP. have teamed up to develop cars and trucks powered by fuel cells and other alternatives to gasoline. The collaborative effort will run through 2004, the year when GM, FORD MOTOR CO. and DAIMLERCHRYSLER AG have said that they plan to be ready to launch commercial production of fuel-cell vehicles. The powerplants in those products, which produce electricity through a chemical reaction between hydrogen and oxygen with few if any emissions, manufacture power as they run. That eliminates the primary drawback of battery-powered electric vehicles like GM's EV1: constant recharging. However, fuel cells remain prohibitively expensive. Cutting that cost will be a primary focus of the Toyota-GM R&D effort. The partners also will work on other clean-air technologies, including hybrid electric vehicles. Toyota already has launched such a car, the Prius, in Japan and will bring it to the United States in 2000 (see Japan-U.S. Business Report No. 347, August 1998, p. 8). Last summer, Toyota and GM announced two narrowly focused alliances in the field of environmentally friendly vehicles involving collaboration on a charging system for electric vehicles and an information exchange on fuel cells (see Japan-U.S. Business Report No. 346, July 1998, pp. 8-9).

ISUZU MOTORS LTD.'s Cerritos, California subsidiary will open a parts distribution center in November in West Chester, Ohio, north of Cincinnati. The facility, which will involve an investment of $88 million, including $74 million in inventory, will store, package and ship various products, including service parts, parts for export and engines. PROMAX AUTOMOTIVE, INC., a wholly owned subsidiary of ITOCHU CORP., will operate the center for Isuzu. As part of the deal, Promax will move its headquarters from Madison Heights, Michigan to Ohio. The warehouse will employ about 90 people.

Across the Ohio River in Erlanger, Kentucky, TOYOTA MOTOR MANUFACTURING NORTH AMERICA, INC. announced a $15.4 million expansion of its headquarters. Scheduled to be completed in May 2000, the project marks the second time that TMMNA has added space since locating in Erlanger in 1996. Last year, it opened a laboratory to handle quality and production engineering activities. The company, which manages TOYOTA MOTOR CORP.'s North American manufacturing operations, currently employs 630 people, but that number is expected to reach 700 soon. The latest announcement boosts TMMNA's investment in its offices to more than $68 million. Late last year, Toyota said that it would build a Midwest parts center in nearby Hebron, Kentucky (see Japan-U.S. Business Report No. 352, January 1999, p. 9).

Two of NISSAN MOTOR CO., LTD.'s biggest parts suppliers — CALSONIC CORP. and KANSEI CORP., which are both partially owned by the number-two Japanese automotive maker — will merge in April 2000. In August, however, they will combine their U.S. development centers, with the 19 people of Kansei's KANTUS CORP. Southfield, Michigan unit joining the 122-member engineering staff of CALSONIC NORTH AMERICA, INC. in Farmington Hills, Michigan. A primary focus of their work will be cockpit modules, which integrate into a single unit such components as steering columns, electric wiring and dashboards. Calsonic has three major U.S. manufacturing operations: CALSONIC INTERNATIONAL, INC., an Irvine, California maker of air-conditioning kits; CALSONIC MANUFACTURING CORP. of Shelbyville, Tennessee, which manufactures air-conditioning systems, exhaust systems, engine cooling systems and heaters; and CALSONIC YOROZU CORP., a Morrison, Tennessee joint venture with YOROZU MANUFACTURING CORP. and SUMITOMO CORP. that produces stamped and welded metal parts. Kantus turns out such products as instrument clusters, instrument panels, radiator grilles and bumpers at a factory in Lewisburg, Tennessee.

A $25 million capacity expansion is underway at INTAT PRECISION, INC. in Rushville, Indiana. The wholly owned subsidiary of AISIN TAKAOKA LTD. makes ductile and gray iron castings for TOYOTA MOTOR CORP.'s Georgetown, Kentucky complex, the NISSAN MOTOR CO., LTD. assembly plant in Smyrna, Tennessee and ISUZU MOTORS LTD.'s factory in Lafayette, Indiana. The new manufacturing line will lift capacity by 50 percent to 60,000 tons a year. In operation since 1989, INTAT Precision had sales of roughly $70 million in FY 1998. It is aiming for revenues of $83.3 million in FY 2004, by which time it hopes to have the Big Three U.S. automotive makers as customers.

Starting in January 2000, CARDINGTON YUTAKA TECHNOLOGIES, INC. will be able to turn out 4,000 torque converters a day for HONDA MOTOR CO., LTD. Accords and Civics built in the United States. That will represent a 35 percent capacity boost for the Cardington, Ohio factory. The $5 million expansion is the second undertaken since YUTAKA GIKEN CO., LTD. and minority partner Honda (30 percent) formed CYT in early 1995 to make catalytic converters as well as torque converters.

Also for the second time in the less than two years that it has been in operation, TOYOTETSU AMERICA, INC. announced expansion plans. The wholly owned Somerset, Kentucky subsidiary of TOYODA IRON WORKS CO., LTD., a manufacturer of stamped and welded automotive parts for TOYOTA MOTOR CORP.'s Georgetown, Kentucky factory, will spend $5 million to raise capacity 50 percent by September 2000. Part of this money will be used to install a 1,000-ton-class press. The expansion will boost staffing to 200 people. Toyotetsu America is projecting FY 2000 sales at $55 million.

By late 2000, Franklin, Indiana-based MHI CLIMATE CONTROL INC. should have the capacity to make 900,000 scroll compressors a year for automotive air-conditioning systems. In the latest of several periodic expansions toward that goal, the MITSUBISHI HEAVY INDUSTRIES, LTD. company is raising annual compressor capacity to 500,000 units from the current 400,000-unit level. The increase is keyed to a spring 1998 contract from GENERAL MOTORS CORP. (see Japan-U.S. Business Report No. May 1998, p. 9). For now, MHI Climate Control is shipping more than 200,000 AC systems a year to GM for use in the Cadillac line. Its other main customer is MITSUBISHI MOTORS MANUFACTURING OF AMERICA, INC., which buys 100,000- plus systems a year. MHI Climate Control combines its scroll compressors with purchased evaporators, heat exchangers and the other parts needed to sell AC systems.

Beginning in June, AISIN SEIKI CO., LTD. will supply automatic transmissions to truck manufacturer FREIGHTLINER CORP. This is a new North American business for the parts supplier, one that it believes could generate $4.2 million in annual sales. The A581 transmission will be mated with the Portland, Oregon company's 280- horsepower engine. AISIN WORLD CORP. OF AMERICA of Downers Grove, Illinois is backstopping the deal.

KAWASAKI HEAVY INDUSTRIES, LTD. will design and build the doors and the tail section for the first commercial tiltrotor aircraft, the BA 609. The project's prime contractor is BELL/AGUSTA AEROSPACE CO., a joint venture between BELL HELICOPTER TEXTRON INC. and an Italian company. Like the V-22 Osprey tiltrotor that Bell Helicopter is building with BOEING CO. for the military, the six-passenger BA 609 can take off, land and hover like a traditional helicopter when its rotors are in the vertical position and fly with the high speed and the range of a turboprop fixed-wing airplane with the rotors in a horizontal position. KHI will work with AEROSTRUCTURES CORP. of Nashville, Tennessee, which is in charge of the fuselage for the BA 609. First flight is expected in late 2000, with deliveries are scheduled to start in 2002. The BA 609 will be built in Amarillo, Texas along with the V- 22 Osprey tiltrotor.

All of the orders that KAWASAKI RAIL CAR, INC. has received for subway cars and light-rail cars have not been good for the bottom line. The Yonkers, New York subsidiary of KAWASAKI HEAVY INDUSTRIES, LTD. lost $70 million in 1998, mainly because design modifications to 200 double-decker rail cars ordered by New York's Long Island Rail Road and the Maryland Department of Transportation drove up production costs. After injecting $60 million into Kawasaki Rail Car in March, KHI decided that it would do more work in Japan than it had planned on a 400 subway car contract from New York City's Metropolitan Transportation Authority that currently is being filled. How the work will be divided on a more recent MTA order for 212 subway cars apparently has not been decided 9see Japan-U.S. business Report No. 354, March 1999, p. 12).

An exchange rate of ¥120=$1.00 was used in this report. aaaaa

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