Toyoda Gosei pursues new strategy, different markets

Dover, Ohio—Sometimes, knowing your weaknesses is just as important as knowing your strengths. And if 2014 is any indication, automotive supplier Toyoda Gosei Co. Ltd. intends to strengthen its presence in all regions of the world.

Following a tour of recently-acquired Meteor Gummiwerke KH Badje GmbH & Co. KG's automotive sealing facility in Dover, Toyoda Gosei president Tadashi Arashima reiterated the company's goal to grow its non-Toyota business to account for about half of its total sales.

Toyota Motor Corp. currently accounts for about 65 to 70 percent of the firm's sales, which it reported at about $6.39 billion for fiscal 2014 ending 31 March, according to the company president.

“In the past, our strategy has been a bit more reactive,” Arashima said. “Now we're becoming more proactive, particularly in some of the markets where Toyota's market share is not as strong. Our investment, fixed costs, cannot be covered by only the Toyota volume. So we need to bring in non-Toyota customers as well.”

To achieve its lofty goal, North America and Europe will play large roles. About 73 percent of Toyoda Gosei's sales were generated in Asia. Japan led the way at about $2.91 billion, with the rest of Asia and Australia reporting about $1.75 billion.

North America accounted for about $1.51 billion, but sales in Europe and Africa only totaled about $217 million. Counting Meteor, its European and Africa business accounts for five of Toyoda Gosei's 64 group companies.

“We are very well situated in Japan and North America, but Europe was a little bit weak. That's why we decided to buy Meteor,” Arashima said.

New business

Toyoda Gosei has been aggressive in addressing both Europe and North America in the last 12 months. Arashima said Meteor will help it gain new business with European original equipment manufacturers, specifically Daimler A.G.'s Mercedes-Benz brand.

Meteor, a producer of automotive rubber sealing products such as weatherstipping, also has relationships with BMW A.G. and Volkswagen Group's Audi A.G. subsidiary. Acquiring Meteor's technical capabilities will allow Toyoda Gosei to apply them throughout its network of facilities and potentially grow its business with European auto makers in other regions of the world.

The firm paid about $44 million to acquire Meteor in a deal that closed 30 April

“The European way of making those weatherstrips is a bit different from ours,” Arashima said. “Meteor has the engineering capability and the production capabilities of dealing with those customers.”

Meteor doesn't just help in Europe. The Dover facility has partnerships with the Detroit 3, which will serve to enhance the partnerships already established through its 18 North American companies. He said Ford has recognized Toyoda Gosei within its Aligned Business Framework, which is a designation Ford gives to preferred suppliers.

“We have three pillars: North America, Japan (and Asia) and now Europe,” Arashima said. “Having that is very important, and Meteor plays a very big part for the European OEMs.”

Moving south

When customers start expanding in a region, suppliers need to follow. At least the ones that don't want to be left behind.

Automotive manufacturers such as Honda Motor Co. Ltd. and Nissan Motor Co. Ltd. have expanded either their production or automotive parts spending in Mexico since 2007.

While Toyota does not have a manufacturing presence in the region yet, Arashima is optimistic that it could soon.

If Toyoda Gosei wants to grow its North American sales to about $1.8 billion in 2018, it will need to go where its customers are expanding their focus.

“The gravity of the North American production is moving south, so we also need to expand our facilities in the southern part of the region, particularly in Mexico,” he said. “There are so many new plants coming up, so we have to better serve our customers by being very close to them. Otherwise the logistics costs are phenomenal.”

Toyoda Gosei's latest Mexican venture is Toyoda Gosei Irapuato Mexico S.A. de C.V., located in Irapuato. The company is scheduled to start operations in April 2016 and will supply radiator grilles, console boxes and other plastic parts to auto makers in the North American market.

The company said it is investing about $67 million to build the plant, and it plans to hire 280 employees by fiscal 2019.

The Irapuato facility will be Toyoda Gosei's fourth manufacturing firm in Mexico: TAPEX Mexicana S.A. de C.V. produces safety systems such as airbags, while Toyoda Gosei Automotive Sealing Mexico S.A. de C.V. makes sealing products, including weatherstrips.

Toyoda Gosei Rubber Mexico S.A. de C.V. will produce functional components such as rubber hoses. The facility was just completed in April, and the operation is on track to begin production in February 2015. The firm said it expects to hire 150 employees by 2016.

Once the two facilities are operational, the company will have manufacturing capabilities of all four of its core product lines in Mexico.

Plenty of opportunities

Arashima sees growth opportunities throughout all of Toyoda Gosei's four core product lines, which include automotive sealing products, functional components, interior and exterior parts, and safety system products.

Interior and exterior parts account for about 31 percent of the firm's total sales, with safety system products right behind at about 29 percent. Automotive sealing and functional components—the rubber side of Toyoda Gosei's business—account for about 19 and 11 percent each. All four product lines grew by at least 12 percent from fiscal year 2013, with functional components growing the most, by 19 percent.

“I really feel in each area we have huge opportunities to grow,” Arashima said.

The executive said that air bags are still not standard in emerging countries such as China, India or Africa, but eventually they will require them, and that will provide a growth opportunity for the firm's safety systems business.

He said that safety requirements will continue to become more stringent, with the number of air bags increasing in established countries and the complexity of functional components, such as brake hoses, always increasing to address fuel efficiency and other environmental issues.

“In safety and functional areas, quality is so important,” he said. “If you fail, it could lead to a recall. OEMs are very concerned about the quality, and our proven record.”

And with its strong global footprint, operating 94 plants with offices in 18 countries or regions, Arashima said the firm is ready to provide these technological solutions to its customers virtually anywhere in the world.

“We have all the necessary elements to do business on a global basis,” he said.