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New Denso Head Sees Growth in A/C, Diesel and Telematics


Koichi Fukaya
Denso president and CEO

One of Koichi Fukaya’s first jobs as the newly appointed president of Denso Corp. was to break ground on the company’s new production facility in Arkansas.

Not a bad job in an industry plagued lately with more bad news than good news. Global plant closures and job cuts seem to be more common these days than new facilities. For the people of Osceola, Ark., who have been subjected to numerous manufacturing job losses, it was a day of hope. For Denso it was a day of investment in a market that it says is still growing and will continue to grow.

The $35 million plant (see below) will supply air conditioners to Denso’s southern U.S. Japanese transplant customers and heavy duty radiators to Caterpillar. Fukaya is counting on air conditioner growth in both North America and Europe to help it continue its financial growth. Denso’s consolidated net income for the fiscal year that ended March 31, 2003 jumped 53.5 percent to $925.2 million while operating income totaled $1.3 billion, a 19.9 percent increase from the previous year.

Fukaya — president and CEO of Denso since June — recently sat down with Automotive Industries to talk future growth, current trends and where the company is going.

Q. Where does Denso see the most product growth globally in the future?
A. In terms of numbers of sales, air conditioning is No. 1. The second would be diesel technology in Europe. In the area of engine management, we want to grow in Europe and North America. Another area of growth is navigation systems.

Q. Unlike some automakers and suppliers, were you prepared for the great diesel demand in Europe?
A. We knew that the diesel would become big in Europe and we had prepared in advance. Compared to Robert Bosch our operation is tiny even though we are poised to make an “attack.”

Q. Who is your largest customer for diesel right now?
A. The diesel engines that the Japanese OEMs make or use. We are “attacking” the European diesel engine car manufacturers and I have a feeling that we are very capable of being competitive. I’m looking forward to hearing some good news from our salespeople in Europe.

Q. How long will the diesel demand continue?
A. For sometime in future it will continue to grow. Diesel use in Europe is already at a high level. The diesel engine is becoming more compact, more quiet and more efficient with higher performance. The field has been opened up quite a bit.

Q. What is the next market for diesel growth?
A. China will be next. Engines in large size, buses and trucks are becoming modernized. So the desire is for high performance, high efficiency engines while making them more compact. China always demands the latest technology. We are trying to bring to China — diesel’s newest technology — the commonrail technology.

Q. Do you see more diesel engines coming to the U.S. anytime soon?
A. The enthusiasm that exists in Europe is of a different nature. But I do feel more inquiries have been made into the diesel. We do see more requests for presentations for diesel products. I would say the interest is becoming higher and higher in the public.

Q. Where is Denso’s biggest growth area worldwide?
A. The U.S. has already grown quite a bit. But Europe will lead the pack. The inclusion of air conditioning is at about 60 percent in Europe. To boost it up to 80 — 90 percent we’ll be able to sell quite a bit of units. Because of the change in the latest diesel technology there is a bigger arena to play in. Also, there is (currently) a very simple navigation system in Europe that uses an arrow for guidance. We use map based navigation and that will take off in Europe in the future. The growth in the total business in Europe is what we would really like to happen. The No. 2 market would be China.

Q. How important is China for Denso?
A. The amount of cars on the road will double in only few years. A country like that does not exist anywhere else in the world. We want that new business in China. We consider China a very, very important country. One problem though is the OEM mix is very, very complex. First Auto Works has a joint venture with both Toyota and Volkswagen. It was in the media that Toyota would start a new joint venture with Guangzhou Automobile Group, which has a joint venture with Honda. There are a number of activities going on that cannot be seen anywhere else. We are carefully monitoring those moves.

Q. Is your strategy for local production or export?
A. We want to manufacture in China for the growing market there. Export is not an issue. We want to maintain our principle of making products where our customers exist.

Q. Do you expect the financial growth you experienced last year to continue?
A. We will steadily continue to grow.

Q. What do you worry about financially?
A. The exchange rate is something to worry about along with the overall economy in the U.S.
Q. What will this financial growth attributed to?
A. In North America, we already have new businesses contracts. Based on those new businesses I can predicate the growth in the market.

Denso Heads South

Japanese automaker plans to build a new facility in Arkansas.

Japan’s Denso Corp. is the latest supplier to announce it is building a new facility in the U.S. south.

The company recently broke ground on a new $35 million plant in Arkansas. Located in the town of Osceola, which is 172 northeast of Little Rock and 50 miles north of Memphis, the plant will build car air conditioners and heavy equipment radiators for North American customers.

“The facility itself will be 217,000 sq. feet and will include a separate training facility for associate development,” says Jerry McGuire, president of Denso Manufacturing Arkansas Inc (DMAI).

Plant Profile
Name:Denso Manufacturing Arkansas Inc.
Established:July 2003
Location:Osceola, Ark.
Total investment:$35 million
Capital investment:$26 million
Products:car air conditioners,
heavy equipment radiators
Sales:$200 million projected for fiscal 2008
Employees: approximately 500 in fiscal 2008
DMAI will supply southern Japanese transplants including Toyota and Honda with the air conditioners while the heavy duty copper radiators will go to Caterpillar. Capacity at the facility is 1.5 million air conditioners and 70,000 radiators. This is the first time Denso is building radiators in North America. The air conditioners are current technology adapted for each customer.

All of the contracts for the plant are new business for Denso, who will eventually supply Toyota’s new Texas plant from the facility.

Construction on the facility began at the end of July. Radiator production will begin in October 2004 while HVAC production will begin January 2005. Full production is expected in 2008. At that time the company will be employing about 500 people.

Denso admits Arkansas does not have a car building history but says Osceola has a manufacturing history due to several manufacturing facilities that have closed over the years.

“Generally from the information that we’ve received…there’s very available workforce. It sounds like a highly skilled workforce as well,” McGuire says.

The company chose Arkansas for the facility for two reasons, says Satoshi Watanabe, managing director, thermal systems group, for Denso.

“The location is very good for all companies,” he says. “(Plus) there is good labor and a good workforce.”

The company will build a training center to instruct the workers for their new position. Besides training in the Denso philosophy, workers will undergo hands-on training and manufacturing simulation.

“We have to take a lot of time to make sure everyone’s on the same page,” McGuire says. There will be no automation at the plant’s startup, he says.

“Our belief is that automation is advanced so we start at mostly a manual hands-on process. As we develop the skills and we learn the process we can advance further and further,” McGuire says. “Initially there are no plans for robotics.”

Several people from the company’s air conditioning plant in Michigan and the U.K. will transfer to Arkansas. Japanese expatriates will be minimal.

The company’s Battle Creek facility will supply the internal core products which of the A/C unit include the evaporator and heater core. Local supply may eventually increase, McGuire says.

Denso will not supply the Big 3 in Detroit from this plant. That supply will continue to come from the company’s plant in Michigan.

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