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No. 362, November 1999

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Japanese Companies in the US


In December, KITO MACHINE INDUSTRIAL CO., LTD. of Aichi prefecture will open its own plant in Lexington, Kentucky after leasing space from another company to turn out welding machines for the automotive industry as well as washing systems and assembly and leak-testing systems. The KITO U.S.A. CORP. factory is equipped with a machining center, various milling machines, a lathe, drill presses, band saws, a grinder, a shearer, a breaker and welding equipment to customize its products to buyers' specific requirements. It will make three varieties of multispot welding systems, plus an intelligent welding system for flexible body welding lines. Kito U.S.A.'s clients include TOYOTA MOTOR CORP.'s North American operations, but the company, which had sales of $2.3 million in the year through March 1999, hopes to win orders from other vehicle makers. It currently employs 12 people.

Another Aichi prefecture manufacturer is building a plant in the United States to better serve its primary customer, TOYOTA MOTOR CORP.'s affiliated forklift manufacturing operation. OKUNO INDUSTRY CO., LTD. has formed a wholly owned subsidiary in Huntington, West Virginia to produce hydraulic cylinders for the lifting mechanisms of TOYOTA INDUSTRIAL EQUIPMENT MANUFACTURING, INC.'s forklifts. Commercial production is scheduled to start in August 2000 at a rate of 2,500 cylinders a month. At that point, Okuno expects to have a work force of 15 people, but staffing could increase to 50 employees in three years. Columbus, Indiana-based TIEM, in which TO-YODA AUTOMATIC LOOM WORKS, LTD. has an 80 percent stake, has been in business since 1990. It encouraged Okuno to manufacture here as part of its drive to expand local sourcing.

MITSUBISHI HEAVY INDUSTRIES, LTD. is conducting a top-to-bottom review of its struggling machine tool, plastic injection molding and other industrial machinery operations at home and abroad. That examination could produce some major near-term changes in MHI's American business activities, executives acknowledge. At a minimum, the company will consolidate its three U.S. machine tool and injection molding marketing subsidiaries. However, closing MHI MACHINE TOOL U.S.A., INC., a Hopkinton, Kentucky manufacturer of machining centers and computer numerically controlled lathes, is a definite possibility. Set up in 1990, MMT had sales of $112 million in FY 1998, but it apparently is not as efficient as MHI's Japanese factories. Any changes in the company's U.S. presence will take place before the end of the current fiscal year.

Like other makers of earthmoving equipment, HI-TACHI CONSTRUCTION MACHINERY CO., LTD. sees an expanding market in North America for compact hydraulic excavators, especially those with a short-radius arm for working in confined spaces. Through its Houston marketing subsidiary, the company released its first such product, a 5-ton machine. That model will be followed in December by 3-ton and 3.9-ton excavators. Hitachi Construction Machinery also will supply these miniexcavators to DEERE & CO. on an original equipment manufacturer basis. The two are equal partners in 10-year-old DEERE-HITACHI CONSTRUCTION MACHINERY CORP., a Kernersville, North Carolina manufacturer of larger-capacity hydraulic excava-tors. Hitachi Construction Machinery is aiming for North American sales of 1,800 compact excavators in FY 2001, which, if achieved, could produce revenues of $66 million.

SUMITOMO (S.H.I.) CONSTRUCTION MACHINERY CO., LTD. is weighing a request from CASE CORP. for it to supply compact hydraulic excavators for North American sale through the Racine, Wisconsin construction equipment manufacturer's distribution channels. Case has marketed Sumitomo Construction Machinery excavators in the 12-ton to 50-ton segment in the United States and Canada since 1992. However, its inquiry presents a dilemma for the Japanese company. It does not make small excavators. The ones it sells in Japan are supplied by ISHIKAWAJIMA CONSTRUCTION MACHINERY CO., LTD., and their contract prohibits Sumitomo Construction Machinery from mar-keting these products in the United States and Europe. Sumitomo Construction Machinery reportedly will decide by yearend whether it will move into the compact end of the excavator market on its own. For the last year, Case has been an equal partner with Sumitomo Construction Machinery in LINK-BELT CONSTRUCTION EQUIPMENT CO. of Lexington, Kentucky, which makes medium and heavy-duty excavators designed by its Japanese parent as well crawler and truck cranes.

In quick succession, JUKI CORP. formed JUKI AUTOMATION SYSTEMS HOLDING, INC. in Raleigh, North Carolina to sell, service and support Juki-brand SMT (surface-mount technology) and semiconductor assembly systems in North America, South America and Europe and then turned around and bought ZEVATECH, INC. That Morrisville, North Carolina company had been selling Juki's PCB assembly systems in these three markets on an OEM basis since 1987 (see Japan-U.S. Business Report No. 353, February 1999, p. 8). The seller was Switzerland's ESEC HOLDING SA, which acquired Zevatech in 1996. Juki, the number three in the world in terms of installed SMT units, initiated the transfer because it did not believe that sales of its equipment in the Americas and Europe were as strong as they could be, particularly from the vantage point of the company's direct sales in Asia.

The March 1998 order that SUMITOMO HEAVY INDUSTRIES, LTD. received from big stainless steel manufacturer ACERINOX S.A. for a skinpass mill and a tension leveler has resulted in a contract for the same equipment from the Spanish corporation's NORTH AMERICAN STAINLESS subsidiary. The skinpass mill will be installed first at the Ghent, Kentucky supplier's hot strip and plate rolling mill, followed three years later by the tension leveler. Like other recent customers, North American Stainless apparently was sold on the SHI equipment in part because of its ability to produce an extremely bright, defect-free strip surface with excellent metal flatness. The mill's ease of operation and quick roll changeovers also were strong selling points.

Market newcomer MATSUSHIMA MACHINERY RESEARCH CO., LTD. gave WOODINGS INDUSTRIAL CORP. of Mars, Pennsylvania exclusive rights to sell its microwave leveling system and related blast and electrical furnace equipment to steel mills for five years. The Kitakyushu, Fukuoka prefecture manufacturer expects the tie-up to produce fast business results, with revenues projected at $943,400 by March 2000. Woodings has strong industry contacts since it is a leading supplier of tap hole drills, clay guns and a long list of other products that are integral to the production of steel and other metals.

In a major win, MITSUBISHI HEAVY INDUSTRIES, LTD. will be the primary equipment supplier for a pair of natural gas-fueled power plants that SITHE ENERGIES INC. plans to build in Massachusetts. MHI won the contract, valued at some $566 million, from RAYTHEON ENGINEERS & CONSTRUCTORS, INC., the turnkey contractor for a 1,600-MW plant at the Mystic Station in Everett and an 800-MW plant at the Fore River Station in Weymouth. Both plants will employ combined-cycle technology, with each of the three 800-MW blocks built consisting of two of MHI's extremely efficient M501G gas turbines, a like number of its heat-recovery steam generators and one MHI steam turbine generator. Work at both sites is expected to start in the first quarter of 2000 and to be completed in early 2002. Thanks in large part to MHI's technology, the new plants will be among the cleanest-burning generating facilities in New England.

Ironically, news of this contract award came right before TOKYO ELECTRIC POWER CO., INC. executives let it be known that the company had decided to buy a natural gas- fueled combined-cycle generating system from GENERAL ELECTRIC CO. for installation at its Futtsu, Chiba prefecture power station. GE claims a 52.8 percent efficiency rating for its state-of-the-art gas turbine versus 51 percent for MITSUBISHI HEAVY INDUSTRIES, LTD.'s competing gas turbine, which TEPCO is installing as part of a combined-cycle system at its Kawasaki, Kanagawa prefecture complex. Engineers at Japan's top electric utility calculate that every percentage point increase in thermal efficiency saves the company some $103.8 million in annual fuel expenses. That and other cost reductions will be key as greater deregulation comes to Japan's electricity market. The Futtsu plant is scheduled to go onstream in 2003, the same year the Kawasaki station is operational.

An exchange rate of ¥106=$1.00 was used in this report. aaaaa

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