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No. 357, June 1999

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Japanese Companies in the US


TRANSPORTATION EQUIPMENT

Unable to meet U.S. demand for its products despite an extensive North American production base, HONDA MOTOR CO., LTD. will invest $400 million in a light truck factory located about 40 miles east of Birmingham, Alabama in the town of Lincoln. Work on the plant will begin in mid- 2000, with production scheduled to start in the spring of 2002 and expected to reach capacity output of 120,000 vehicles a year in 2003. Light trucks, especially sport-utility vehicles and minivans, are the hottest-selling products in the United States, but that is where Honda is weakest. Company executives have not yet decided what specific models will be built in Alabama. However, industry analysts are betting that one product will be the Odyssey minivan now made at Honda's Alliston, Ontario plant since capacity there falls far short of demand. Another possibility is a new, Odyssey-based SUV that the Canadian plant will start turning out in late 2000. Whatever vehicle is assembled in Alabama, the plant will represent a break with how Honda, the first Japanese automotive maker to manufacture in the United States (1982), builds vehicles at its sprawling Marysville, Ohio factory or at its facilities in East Liberty, Ohio, Canada and Mexico. For starters, the 1,500 people expected to be working at the Lincoln factory by 2003 will assemble trucks and their engines simultaneously. In effect, every engine will be made to order for a specific vehicle. The complex will have an aluminum casting foundry, even though the production run is extremely limited. It will not, however, have its own body stamping and plastic parts molding facilities, a major departure from standard practice for Honda. All those components will be sourced from outside vendors. In fact, Honda will have to develop a new network of suppliers since most of its 450-odd current suppliers are located in Ohio or elsewhere in the upper Midwest.

The day after HONDA MOTOR CO., LTD. announced plans for a light truck plant in Alabama, the company said that it would spend $30 million to expand capacity at the HONDA OF AMERICA MANUFACTURING, INC. engine plant in Anna, Ohio. This facility currently can produce 900,000 engines a year — enough for the Accord, Civic and various Acura sedans currently built in Marysville, Ohio, East Liberty, Ohio, Alliston, Ontario and Mexico (Accords only) and for the Odyssey minivan made in Canada. However, with an expansion now underway at the Alliston factory to boost Odyssey output and another planned to launch production of Honda's new SUV there, the company wants to increase the Anna plant's engine capacity to 1,001,000 units a year by 2001. That includes four-cylinder Accord and Civic engines as well as 3.0-liter V-6 engines for Accord and Acura sedans and Odyssey minivans. The additional investment in the engine factory is part of the roughly $360 million that Honda plans to spend, mostly in Japan, over the next three years to strengthen its global position.

RICHMOND AUTO PARTS TECHNOLOGY, INC. plans to launch integrated production of V-6 transmission gears for HONDA TRANSMISSION MANUFACTURING OF AMERICA, INC. in Marysville, Ohio. Richmond, Kentucky-based RAPT, a subsidiary of AICHI KIKI CO., LTD. that recently began operations, currently imports forged materials from Japan and then machines, grinds and heat processes them into gears. Through an additional investment in forging machines and other equipment, RAPT will have the capability by 2001 to perform all the manufacturing steps to make 1,400 sets of seven gears each per day for HTM, or 340,000 a year. By then, Nagoya-based Aichi Kiki expects to have invested $46.8 million in RAPT, which should be doing more than $25 million in annual business and to have 86 people on its payroll.

What big sealing component manufacturer FREUDENBERG-NOK calls its focused-factory strategy — plants dedicated to specific processes and products — is moving forward in New Hampshire (see Japan-U.S. Business Report No. 350, November 1998, p. 10). By early next year, the Plymouth, Michigan-headquartered joint venture between NOK CORP. and Germany's FREUDENBERG & CO. will open plants in Franklin and Laconia, New Hampshire to produce bearing seals and shock, strut and steering seals. Equipment and personnel will be transferred to these plants from the company's huge complex in Bristol. In the meantime, Freudenberg- NOK's Ashland facility, which makes low-volume radial shaft seals for general industrial applications as well as automotive products, is at full production. Moreover, in early June, the company opened a factory in Northfield dedicated to the production of highly engineered axle seals for light and heavy-duty trucks.

HITACHI METALS, LTD. has reorganized its U.S. iron castings operations in the United States. The company sold EMI CO. of Erie, Pennsylvania to GUNITE CORP., a JOHNSTOWN AMERICA INDUSTRIES, INC. subsidiary that manufacturers wheel-end components for medium and heavy- duty trucks and trailers, for about $18.7 million. EMI, which Hitachi Metals bought into in 1988, has annual revenues of approximately $55 million. Roughly 40 percent of that volume comes from wheel-end components for medium and heavy trucks and trailers. The Japanese parent retained EMI's other businesses, including wheels and brake drums for medium and heavy-duty trucks and trailers, and integrated them into ACP MANUFACTURING CO. L.L.C. of Lowensville, Pennsylvania. Hitachi Metals also owns 11-year-old AAP ST. MARYS CORP. in St. Marys, Ohio, a manufacturer of aluminum wheels for cars and light trucks.

Major automotive interior supplier JOHNSON CONTROLS, INC. will buy a seat-trim plant in Glasgow, Kentucky from TECHNOTRIM INC., a Livonia, Michigan-headquartered partnership between TACHI-S CO., LTD. (49 percent) and JCI. TechnoTrim, which also operates seat-trim plants in Maysville, Kentucky and Stockton, California, announced in March that the Glasgow plant, opened in 1992, would be closed because of the company's new plant in Mexico. Johnson Controls will convert the factory to make sun visors and overhead consoles. About 300 TechnoTrim employees in Glasgow will be offered jobs with Johnson Controls.

Window regulators for three upcoming GENERAL MOTORS CORP. products will be supplied by HI-LEX CONTROLS, INC. of Litchfield, Michigan. The vehicles are the next-generation Chevrolet S10 pickup and Pontiac Grand Prix and a new Saturn SUV. The contracts are valued at $28 million a year. Hi-Lex Controls, a NIPPON CABLE SYSTEM INC. unit, has made window regulators since 1990. To ensure that it continues to win orders like the one from GM as well as contracts for the automotive control cables made by HI-LEX CORP. in Battle Creek, Michigan, Nippon Cable System opened a large technical development and testing facility in Troy, Michigan.

In July, ASAHI RUBBER INC. of Fukushima prefecture will open a wholly owned subsidiary in Arlington Heights, Illinois to market color silicone rubber caps. FORD MOTOR CO. and GENERAL MOTORS CORP. will be the primary sales focus of ARI CORP.'s staff. The caps are designed to cover small light bulbs in car and truck instrument panels. In FY 2003, Asahi Rubber, reportedly the sole manufacturer of lighting-use color caps for automotive applications, expects this part of its U.S. business to generate annual sales of $4.5 million.

The decision by New York City's Metropolitan Transportation Authority to award Canada's BOMBARDIER, INC. a firm contract for 192 electric commuter cars for the Long Island Rail Road and an option for 808 more (including cars for the Metro North Railroad) has opened a new business in the United States for MITSUBISHI ELECTRIC CORP. The Japanese company is Bombardier's subcontractor for the cars' motors, main control systems and other electrical equipment. The firm part of the order is worth $445 million. If MTA exercises all its options, the contract would be valued at close to $1.9 billion. Bombardier calculates that about one- fourth of the project's costs will be for electrical components. Deliveries of the commuter cars to LIRR will start in 2002 and extend over five years.

An exchange rate of ¥122=$1.00 was used in this report.aaaaaa

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