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1986 FIN – Domestic Automotive Fastener Manufacturers Get Cool Reception from New Foreign Auto Assembly Plants In North America

October 6, 1986 FIN – Are domestic automotive fastener manufacturers getting a fair shake when it comes to supplying fasteners used by foreign companies at their auto assembly plants in the U.S.?

Currently three Japanese companies (Honda, Nissan and Toyota) are already assembling cars in the United States and six others have either announced plans, or expected to soon, to build factories in this country or Canada by the end of the decade.

Japanese assembly plants in the U.S. (sometimes referred to as “immigrant” or “transplant” plants) accounted for about 25,000 passenger cars in 1985.
This output is predicted to grow to 900,000 units by 1988 and possibly to as high as 1.5 million by 1990.
To these figures you can add the autos produced in the U.S. by Volkswagen in New Stanton, Pennsylvania; and assembly plants which automakers from other countries, like South Korea, plan to establish here.

The following list is not all-inclusive but it will provide an idea of the proliferating presence by foreign companies that will be taking place on the domestic auto scene.
• Honda of America, which now has the biggest U.S. car making operations, plans to expand its operations in Marysville, Ohio, where it makes the Civic and Accord, and also has plans for a plant in Canada (from where it can ship cars duty free to the U.S.)
• Toyota, Japan’s largest automaker, has a joint venture, United Motor Mfg. Inc., with General Motors in Fremont, California, and also has plans for a new auto assembly plant in Georgetown, Kentucky and another in Canada.
• Mitsubishi Motor Corp., which last year established a 50/50 venture with Chrysler Corp. called Diamond Star Motor Corp., starting in 1988 will produce subcompacts at a new assembly plant now under construction in the Bloomington-Normal, Illinois area.
• Mazda Motor Mfg. (U.S.A.) Corp., has signed an agreement with Ford Motor Co. (which owns about 25% of Mazda) to produce Mustangs at a plant to be built in Flat Rock, Michigan.
• Fuji Heavy Industries and Isuzi Motors have announced that they are teaming up to build a plant in the U.S.
• Suzuki Motor Co. Ltd. (Japan’s 4th largest auto maker) and General Motors of Canada Ltd., have announced plans to build a $360 million fully integrated 1.6 million sq ft auto plant in Ingersoll, Ontario, Canada which, beginning in 1989, will produce about 120,000 subcompact cars and 80,000 sport-utility vehicle annually.
• South Korea’s Hyundai Motors is building an auto assembly plant in Quebec, Canada for its line of subcompacts.
• Nissan was discussing the possibility of assembling autos at an existing an American Motors Corporation plant in Brampton, Ontario which has excess capacity. This deal may have fallen through but the indication is that Nissan is looking to set up operations in Canada sometime soon.
• A.B. Volvo of Sweden’s U.S. truck subsidiary, Volvo White Truck Corp., has merged its heavy duty truck operations (class 8 vehicles) with GM’s to form Volvo GM Heavy Truck Corp. and present plans call for GM to close down its truck manufacturing plant in Pontiac, Michigan and shift production to Volvo plants in Virginia and Utah in the future.

The U.S. now has about 52 auto assembly plants and only four of these (the three Japanese mentioned above and Volkswagen plant in Pennsylvania) are immigrant plants.
But by1991 (when there will be about 60 assembly plants operating) the number of foreign owned plants will have tripled in number.

And as immigrant auto assembly plants (and fully integrated auto plants) increase, you can also expect foreign auto parts makers to set up operations in the U.S.
“America will be inundated with new Japanese auto parts manufacturing plants by 1988 if present trends continue” predicted a recent report prepared by John E. Peters, a Tokyo-based consultant for the American Embassy’s U.S. and Foreign Commercial Service in Japan.
Peters also said that not only did the Japanese auto suppliers plan to do business with Japanese automakers such as Honda in Marysville and Mazda in Michigan, but they also hope to get additional business from U.S. automakers.
Peters estimates that there are already between 500 and 600 Japanese manufacturing firms located in the U.S. and that another 300 will set up here in the next two years.
He didn’t say how many of these would supply the auto industry, but a recent article in INC magazine, (August, 1986) predicts that within the next three years at least 40 Japanese auto part makers will set up new plants in the Rustbelt alone.
This tailgating by the auto parts makers isn’t just a random thing either. According to Clayton K. Yuetter, United States trade representative, “Design and purchasing decisions for the Japanese cars assembled in America are made in Japan and in many cases the contracts to bring Japanese suppliers into the U.S. are signed in Japan before production ever starts in the U.S. facility.”

Looking at things from the domestic automotive manufacturers’ viewpoint, you’d hardly call the present situation a rosy one, considering these factors:
1.) Their traditional marketplace, the U.S. auto industry, (which uses domestically produced fasteners) has eroded with the flood of imported cars (which contain foreign made fasteners), taking a big slice out of the marketplace. Imports now represent about 30% of new car sales and will account for about 36% of the market by 1988.
2.) The immigrant auto assembly plants are currently not using much in the way of domestically produced fasteners and apparently don’t have plans to change this situation in the near future.
3.) Not only are foreign auto parts manufacturers following their auto makers here but they also intend to go after the U.S. auto companies’ business as well.

All the above is by way of setting the scene for the results of a survey which FIN recently conducted on the subject of “The Use of Domestically Produced Fasteners by Foreign Auto Makers in Their U.S. Plants.”
The survey, which we would hardly characterize as “in-depth” or “comprehensive” in nature, does, however, provide some indication of what the situation is today. And while we’re not going to identify the respondents to this survey, not having obtained their permission to do so, we can assure you that these respondents represent almost all of this country’s major automotive fastener manufacturers.

Specific Survey Results

1.) Do you presently manufacture automotive fasteners?
FIN mailed about 150 questionnaires to fastener manufacturers which it believed might be producing automotive fasteners. From 46 replies it selected 35 companies which it felt are major suppliers to the auto industry. The survey results represent the answers from those 35 fastener manufacturers.

2.) To which U.S. auto companies do you sell fasteners? (35 replies)
31 of the respondents said they sold to GM; 28 said they sold to Chrysler; 27 said they sold to Ford; and 19 said they sold to American Motors.
Other vehicle making companies mentioned as customers for fasteners included; Navistar International Corp. (formerly International Harvester), Peterbilt Motor and Kenworth Truck Co., divisions of Paccar Inc.; Mack Trucks Inc., Deere & Co.; Freightliner Corp.; Caterpillar; Oshkosh Truck; Massey Ferguson; and J.I. Case.

3.) How are these fasteners sold? (30 replies)
A total of 25 companies said these fasteners were sold direct; two said they were sold through manufacturers reps; and three said they were sold through distributors.

4.) Are any of the fasteners you supply to the U.S. automakers imported, and is so, what percentage? (34 replies)
Ten companies said some were imported and 24 companies said none were. Two companies put the percentage below 5%; three companies put the percentage at 5%; three said 10%; one company said 20% and one company said 30%.

5.) Are you presently selling fasteners to any of the foreign companies (Japanese and German) which are producing (or assembling autos, trucks, motorcycles etc. in the U.S? (35 replies)
Five companies (14%) replied yes and 30 companies (86%) said no.

6.) If not, have you ever received a request to quote on fasteners by these foreign owned companies? (31 replies)
Eight companies (26%) said yes and 23 companies (74%) said no.

7.) If you received a request to quote were there any special conditions (metric sizes, materials of constructions, price, delivery, financing, etc.) that made it difficult or impossible for you to become a supplier of these fasteners? Please specify.
• We presented prints in metric and Japanese. This turned out to be a futile exercise. Finally we quoted 12 items and received an order for one item which we have supplied for several years – total annual sales of $235, which permits them to list out name as a supplier.
• We have only received such inquiries from VW and they were difficult to interpret because most of the specs were in German.
• We received a sample part to quote with no specifications included. We asked but were told that all specs were in Japan and not available. If we wanted to quote to the sample, ok, but no specs would be furnished.

8.) Have you actively tried to obtain business from any of the foreign producers of autos in U.S.? (35 replies)
22 companies (71%) said yes and 13 companies (29%) said no.

9.) If so, what was the response? Comments follow.
• We were unable to obtain an inquiry. We were told they were buying direct from foreign suppliers and would look for domestic sources “at a later date.”
• A recent example is Diamond Star Motors which at a recent meeting of suppliers stated that all fasteners will be imported.
• Honda told us it was cheaper to import fasteners from Japan.
• Passive – all products to date are being brought in from offshore.

10.) Who do you think (U.S. and/or foreign companies) are presently supplying fasteners for vehicles made by foreign companies in the U.S. (33 replies).
21 respondents (64.6%) said foreign sources; 5 respondents (15.1%) said both U.S. and foreign suppliers; 3 respondents (9%) said Japan. Also mentioned: Taiwan, Korea and Italy.

11.) Do you think this situation could change in the future as more foreign companies begin to manufacture (or assemble) vehicles in the U.S? (34 replies)
Nine companies (26.5%) said yes; 9 companies (26.5% said no; and 16 companies (47%) said they were not sure.

12.) Do you think the enforcement (and/or further adoption) of domestic legislation (like domestic content laws) could provide more opportunities for domestic fastener manufacturers? (34 replies).
23 companies (68%) said yes; 9 companies (26%) said no; and 2 companies (6%) said they were not sure.
Comments on this question follow:
• Japanese will bring suppliers from Japan, call them American companies, and buy from them.
• A domestic content law, if enforced, would help, but at a cost too high to our country.
• Domestic content laws might help but there also needs to be a more uniform standard of performance required throughout the industry that is producing vehicles for use in the U.S.
• There are too many loopholes.
• Legislation is the only way.
• Such legislation is likely to accelerate the movement of Japanese fastener manufacturers to the U.S.
• It appears that Japan is looking for U.S. companies to form joint ventures. We have been contacted and eventually may reciprocate the interest. Japan is, we think, aware of anti-import legislation materializing if they don’t take the initiative. In the meantime it’s almost impossible for us to crack the marketplace.
• Our experience with Honda suggests they are not about to buy fasteners from the U.S. unless forced to. We can’t even get an appointment to discuss requirements and we’ve tried.
• Doubtful. Monetary value per car is too low to cause change in sourcing. Fastener economic impact is minor compared to tires, glass, etc.

13.) Do you have any other comments about the use (or non-use) of domestically produced fasteners by foreign companies assembling vehicles in the U.S.?
Comments follow:
• Until Japan feels it’s absolutely necessary to use domestically produced fasteners they will continue to import. The fastener industry in Japan has lots of capacity and there will be growth difficulties for the next few years due to the yen and pressure from Taiwan and Korea. We predict the balance of the eighties will see many joint ventures happening to prepare them for the future.
• We deeply resent the use of our state income tax dollars to grant “training” and tax abatement, and other disguised bribes and subsidiaries to foreign suppliers while Honda, Nissan, Toyota, Mazda, et al have no intention of using domestic vendors because they own – or control – most of their fastener vendors.
• The threat of domestic content legislation (or the perceived threat) may force token sourcing of U.S. products, including fasteners. But fasteners are generally considered one of the last commodities considered for sourcing.
• Top suppliers in the industry can supply fasteners to overseas automotive assemblers if reasonable business decisions are guiding purchasing efforts. However not all overseas assemblers are given the authority or encouragement to develop local sources of supply. No amount of legislation will change this.
• I think the Japanese work together to support their domestic industries. Japanese auto plants in the U.S. buy Japanese fasteners because it helps the Japanese economy. Even the 40% change in the yen/$ exchange rate has not prompted interest in U.S. produced fasteners.
• Local sourcing will only occur when domestic manufacturers have more significant economic advantage. When and if this occurs, threat then will be foreign-owned companies establishing facilities in North America.
• If J-I-T becomes as successful here as in Japan there will be two possible situations. One is to have a distributor or manufacturer located within a certain distance from the assembly plant. The other is for a foreign trading company which specializes in various automotive items to locate a warehouse within a few miles of the plant.
• Let’s attempt to get more U.S. content into these vehicles. Otherwise we’ll be sitting with empty plants.
• Ideally, all requirements would be supplied by domestic producers but, realistically, a fair content program would be acceptable.
• A large percentage of fasteners used (imported) by foreign companies manufacturing in the U.S. are manufactured to lower performance specifications and therefore are much lower in price. Our domestic producers don’t accept less than Property Class 9 performance in metric.
• The recent announcement that Korean companies – Pohang Iron & Steel and Dongbu Industrial Co. Ltd. – plan to build a fastener plant in Tennessee indicates they intend to supply these fasteners to GM’s Saturn plant.
This is only the beginning. Look for more such state-subsidized companies to be set up to supply state-subsidized foreign auto companies.

Honda, Toyota and Hyundai will be producing around a quarter million cars annually in their new Canadian plants and Canada’s duty remission program will attract Japanese auto parts makers there to supply these plants.
A lot of these cars and the fasteners they contain will be shipped to this country duty free. These foreign auto parts makers will also be looking to supply the U.S. auto companies. ©1986/2010 Fastener Industry News