Hota to Develop Auto-Parts Zone In Central Taiwan

Hota Industrial Manufacturing Co., a leading domestic maker of auto transmission boxes and precision gears, recently decided to set up production facilities in central Taiwan's Jenhua Industrial Zone together with 22 satellite plants. This is expected to make Jenhua the island's most comprehensive supply base for auto parts.

Hota chairman David Shen expects about 30 auto-parts companies to locate in the zone. He hopes to set up a coordination center there to handle joint procurement, price quotation, and strategic planning, which will help to achieve a stronger collective competitiveness and gain entry into major international supply chains. Planned investment there already tops NT$6 billion (US$188 million at NT$32:US$1), he says.

Shen is highly optimistic about prospects for his company, especially at a time when automakers all over the world are asking their parts suppliers to cut costs and when raw materials costs are rising sharply. This is causing unprecedented financial problems for North American parts suppliers, including Collins and Aikman, which recently filed for Chapter 11 bankruptcy protection.

As a result of these problems, most American auto parts suppliers have been outsourcing their suppliers to Asia, Shen says, predicting that within the next two to three years more than US$50 billion worth of parts orders will come to Asian manufacturers. Some of the orders will go to mainland China; and this trend, he believes, will benefit Taiwanese suppliers that operate across the Taiwan Strait.

To take advantage of the growing opportunities, Hota has bought land in the Jenhua Industrial Zone and plans to invest NT$500 million (US$15.6 million) in the establishment of a new factory there to produce torque converters and automatic transmission parts (among other products) beginning in 2008. Shen reports that another new plant, to be completed by next March in the Central Taiwan Science Park, will concentrate mainly on the production of all-terrain vehicles (ATVs) and parts.

Wide Range of Cooperating Companies

Among the companies that plan to enter the Jenhua Industrial Zone, Shen says, are those that handle heat treatment, computerized numerically controlled (CNC) processing, surface-treatment, grinding, gear-making, drilling, forging, die-casting, and machining-center operations.

The island's auto-parts makers realize that they have to strive for competitiveness collectively instead of fighting individually, Shen stresses. The concentration of so many parts makers in the central Taiwan industrial zone will lead to stronger competitiveness resulting from reduced production costs and higher efficiency, he believes.

Hota itself recently announced a CD (cost down) 330 project aimed at easing entry into the global supply chains of major automobile and auto-parts manufacturers. The goal of this project is to cut costs by 30% over the next three years in a collective effort with satellite plants.

To achieve the goal as quickly as possible, Hota has commissioned the government-sponsored Corporate Synergy Development Center (CSD) to conduct a series of training courses for the employees of Hota and its satellite plants.

Cost cutting has become a top priority for automakers and parts suppliers all over the world, the chairman says. As a result, he explains, "Good quality is no longer the biggest advantage for winning orders from big international brands. A big global outsourcer will hardly pay any attention to a manufacturer without competitive prices, no matter how good its quality or how strong its manufacturing capability."