The markers of how corporate Japan's problems are working to the advantage of expansion-minded U.S. companies now include one with an American/international angle as well as the typical Japanese face. Debt- laden SUMITOMO RUBBER INDUSTRIES, LTD., the number-three tire manufacturer in Japan and the maker of Dunlop-brand tires, is staking its future on GOODYEAR TIRE & RUBBER CO. SRI and Goodyear, now the world's third-largest tire producer, will form four operating companies. In the United States, the Akron, Ohio company will gain a 75 percent interest in SRI's DUNLOP TIRE CORP. subsidiary, which makes car and truck tires in Huntsville, Alabama and Buffalo, New York. This company, which the Japanese firm bought in 1986, does about $800 million worth of business a year. In Western Europe, SRI and Goodyear will combine their 14 tire operations in a business also 75 percent-owned by the American partner. This joint venture should have annual sales of around $4 billion. Two joint ventures also will be set up in Japan, with Sumitomo Rubber owning 75 percent of each. One will make Sumitomo/Dunlop and Goodyear tires for supply to domestic car and truck manufacturers. The other will produce Goodyear-brand tires for the replacement market. The four production companies will be backstopped by a technology-sharing firm and a global purchasing business, both of which will be majority-owned by Goodyear. To equalize the value of the assets involved in the six operations, the Akron corporation will pay its new partner $936 million. Goodyear also will acquire a 10 percent stake in the Kobe-headquartered tire maker, and Sumitomo Rubber will invest an equivalent amount in Goodyear stock. Analysts value this transaction at $88 million. The wide-ranging global alliance is expected to take effect by September 1, 1999. Goodyear projects that it will add $2.5 billion to consolidated annual sales, which totaled $13.1 billion in 1997, including $11.9 billion from tires. The deal once again will make Goodyear the world's biggest tire manufacturer. Sumitomo Rubber's sales of $4.7 billion in 1997, of which $3.6 billion came from tires, obviously will take a hit; however, its business should become more profitable.
Two of HONDA MOTOR CO., LTD.'s parts suppliers have announced new plants. KEIHIN CORP., in conjunction with its INDIANA PRECISION TECHNOLOGY, INC. affiliate, will construct a $9.5 million plant in Muncie, Indiana to make air-conditioning units for the HONDA OF AMERICA MANUFACTURING, INC. factory in East Liberty, Ohio. KEIHIN AIRCON NORTH AMERICA, INC. is scheduled to begin volume production in April 2000, turning out air-conditioning systems for 200,000 Honda vehicles in the initial year and 500,000 annually after three or four years. At that point, KAC could have as many as 150 employees. Indiana Precision Technology has made electronic fuel injection systems in Greenfield, Indiana since 1989. It also has a relatively new subsidiary in Tarboro, North Carolina, CAROLINA SYSTEM TECHNOLOGY, INC., that makes electronic air management systems.
For its part, YACHIYO INDUSTRY CO., LTD. will spend $29 million to build a factory in Marion, Ohio to make state-of-the-art plastic fuel tanks for HONDA OF AMERICA MANUFACTURING, INC.'s Marysville, Ohio factory. US YACHIYO INC., which will do plastic molding using technology developed by its parent and a plastic machinery manufacturer as well as subassembly work, is expected to be operational in August 2000. At full capacity, it will be able to turn out 480,000 fuel tanks annually. Within three years, USY will employ some 80 people. This company is Yachiyo Industry's second U.S. production venture. It also manufactures sunroofs in Columbus, Ohio through A Y MANUFACTURING, LTD.
Production has started at the UNISIA JECS CORP. factory in Monroe, Georgia. However, the company's first wholly owned offshore manufacturing facility is not making the product originally planned. Instead of drive shafts, UNISIA OF GEORGIA CORP. is producing crank angle sensors, cam angle sensors and purge control valves. These engine parts will go to the North American plants of Japanese vehicle makers, including, presumably, those of NISSAN MOTOR CO., LTD., Unisia Jecs' main customer. Unisia of Georgia is projecting sales of $60 million in 2005.
Automatic transmission clutch output will increase this summer at JAYTEC, INC. in Portland, Indiana. Parent F.C.C. CO., LTD. has earmarked $1.7 million to expand the floor space at the 10-year-old plant, which also turns out torque converter lockup clutches and segmented clutch friction disks. HONDA TRANSMISSION MANUFACTURING OF AMERICA, INC. in Marysville, Ohio is Jaytec's main customer. Sales in FY 1998 were an estimated $76.9 million. With the added production, Jaytec, which has 275 employees, is looking for revenues of $85.5 million in FY 1999.
Another parts company that began production in 1989, PACIFIC INDUSTRIES USA, INC., has renovated its Fairfield, Ohio plant. The wholly owned PACIFIC INDUSTRIAL CO., LTD. subsidiary has been making tire valves. Now, it has the capability to produce other small stamped parts for sale to Japanese-affiliated automotive makers in North America. Annual revenues are running around $10 million, but Pacific Industries believes that sales can increase to $30 million a year down the road.
SATURN CORP., a GENERAL MOTORS CORP. company, has awarded contracts to two more Japanese-affiliated parts manufacturers. Via parent TOYO ROKI MANUFACTURING CO., LTD., Findlay, Ohio-based FILTECH, INC. beat out 18 other bidders to supply oil filters for Saturn's small cars. The firm expects to ship 345,000 oil filters to Spring Hill, Tennessee in the first year. Filtech has been making air and oil filters and cleaners since 1990, but the Saturn contract marks the first time that it has won significant business from a Big Three builder. .....The cars that SATURN CORP. builds for the 2000 model year will contain shock absorber modules developed by KAYABA INDUSTRY CO., LTD. The part, which includes the shock absorber itself as well as springs and the mount that connects the unit to the chassis, will be made by Columbus, Indiana-headquartered ARVIN-KAYABA LLC. Kayaba formed this company last year with ARVIN INDUSTRIES, INC. (see Japan-U.S. Business Report No. 350, November 1998, p. 9). The Saturn contract represents the first time that the Japanese partner has supplied its shock absorber module to a foreign automotive maker.
A contract for torque converters for automatic transmissions from FORD MOTOR CO. for a car that will debut as a 2000 model could give a big boost to DAIKIN DRIVETRAIN COMPONENTS CORP.'s business. In time, the Mascot, Tennessee subsidiary of EXEDY CORP., which began operations in early 1996, could supply as many as 500,000 torque converters a year to Ford. NISSAN MOTOR CO., LTD.'s Smyrna, Tennessee complex currently is Daikin Drivetrain's only customer. It buys about 300,000 torque converters annually. With the Ford order in hand, the parts manufacturer believes that revenues could double in the near term to $68.4 million a year.
TAIHO KOGYO CO., LTD.'s plans for U.S. production of engine bearings continue to evolve. Initially, the TOYOTA MOTOR CORP. affiliate was leaning toward having its Tiffin, Ohio subsidiary make these high- performance parts (see Japan-U.S. Business Report No. 350, November 1998, p. 10). Now, however, it is talking about setting up a company with FEDERAL-MOGUL CORP. to manufacture engine bearings as early as 2001. With technical assistance from Taiho Kogyo, the big Southfield, Michigan- based bearing supplier currently turns out main and connecting rod engine bearings for Japanese-owned vehicle factories in North America.
Orders for subway cars continue to roll in to KAWASAKI RAIL CAR, INC. from New York City's Metropolitan Transportation Authority. On the heels of a December contract for 100 cars (see Japan-U.S. Business Report No. 352, January 1999, p. 10), the KAWASAKI HEAVY INDUSTRIES, LTD. subsidiary received an order for another 112 cars. The combined contract is worth an estimated $360 million. The frames of the 212 subway cars will be built in Japan, with final assembly taking place at Kawasaki Rail's Yonkers, New York plant. Deliveries are scheduled over the February 2001- June 2002 period.
In their second U.S. win in 10 months, trader SUMITOMO CORP. and rolling stock maker NIPPON SHARYO, LTD. have an order from the Northern Indiana Commuter Transportation District for 12 light rail cars. Four of the cars in the $29.1 million contract will be user-friendly for handicapped riders on the South Shore Line along the southern rim of Lake Michigan. Final assembly of the cars will take place at a facility outside San Francisco that Sumitomo and Nippon Sharyo plan to use to fill a contract for the neighboring Caltrain commuter rail line (see Japan-U.S. Business Report No. 344, May 1998, p. 10). The Northern Indiana rail cars are scheduled for delivery in the latter part of next year.
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