The ``Asian flu'' that caused currencies to slide also has pruned North American prices for Taiwanese and South Korean-made plastics equipment — but machinery company officials say a flood of machines at fire-sale prices is unlikely.
So far, price cuts have averaged about 10 percent, thanks to Asia's wild currency fluctuations, said officials of companies that ship injection molding machines, extruders and other equipment to North America from Taiwan and Korea.
Japan, which along with Germany, is a dominant foreign force in the U.S. market, also has benefited. In well-publicized moves, Japanese plastics machinery firms have cut U.S. prices in the past two years.
But what about the smaller players, Taiwan and South Korea?
South Korea's currency, the won, has lost more than 50 percent of its value against the U.S. dollar since the currency crisis deepened last fall. But that doesn't mean machines from Korea are half-price. The same goes for Taiwan, where the Taiwan dollar has declined by about 20 percent. Price cuts have not matched that rate.
One big reason: While a weak currency cuts local-content costs, prices for imported components skyrocket.
``For us, it's almost like a trade-off,'' said Allen Tsai, general manager of Miami-based Lung Meng Machinery (USA) Inc. ``Local parts we've got a better price; outside parts we have a higher price.''
Lung Meng's parent in Taiwan, Lung Meng Machinery Co., buys screws and barrels from Italy and control systems and sensors from North America for its line of blown film lines, injection molding presses and machines to make plastic bags. The company just introduced an injection press to North America.
Normally, Lung Meng increases its North American prices 2-3 percent a year. The currency troubles, Tsai said, just mean Lung Meng's prices remain flat this year.
Fortune International Inc., based in Somerset, N.J., sells Fortune injection presses made by Victor Taichung Machinery Works Co. Ltd. in T'ai-chung, Taiwan. Randall Wan, Fortune vice president, said his company has cut prices about 5-10 percent. The company also is starting to work with a leasing firm to let customers try a machine for several months for free. Wan favors that kind of creative approach instead of simply cutting prices.
``We don't want to drop the price because if a customer buys the machine right now and we drop the price, what is that customer's reaction going to be?'' he said.
Other Taiwanese importers cut unabashedly.
``It is beneficial for us. We're currently giving about 10-15 percent off our standard price, and we have more room to negotiate,'' said Thomas Koh, marketing manager at Promax Plastics Machinery Inc. The Rancho Dominguez,
Calif., company distributes DongShin Hydraulics Co. injection presses from South Korea.
John Johnson, director of sales and marketing for TMC of America Inc., hopes to use the currency advantage to draw new business.
``Our list pricing stays very aggressive throughout time,'' he said. ``We sort of use that extra to fund some of our first-time buyers' programs. We may give first-time buyers a 10 percent discount.''
But a 10 percent cut does not equal the Taiwan dollar's fall of 15-20 percent. ``The reason is many of the components — valves, pumps and [electrical] components — are sourced outside of Taiwan,'' Johnson said.
Even before the currency slide, Taiwanese plastics machines were priced about 15-30 percent below machines from the United States, Europe and Japan. But many processors still are concerned about the quality of machines made in Taiwan, so they face an uphill battle, especially in U.S. and Canadian markets. That means still-lower prices will not necessarily spur a big increase in sales, officials from the companies said.
TMC's Johnson called it the Yugo principle: Would cutting the price in half cause a rush to Yugo dealerships?
``You can't just take a machine and say, `OK, we're going to import this machine to the [United] States and forget about it.' You've got to have an infrastructure for service to support it,'' Johnson said in a telephone interview from TMC offices in Winchester, Va.
Troy Lewis knows all about the challenge of selling Taiwanese capital goods to U.S. buyers. During the past dozen years, Lewis has built Sunbo Corp. into the largest importer of molds from Taiwan. Last year, Sunbo of Bellevue, Wash., added a line of Taiwan-made injection molding machines from Asian Plastic Machinery Co. Ltd., a unit of Hong Kong-based Chen Hsong Holdings Ltd.
Lewis said price is a factor — but not the only factor — in buying an injection press. Buyers look at a machine as a long-term purchase.
``People have to be sold on quality and service,'' he said.
Dave Wolf, maintenance supervisor at Mikros Engineering, a Brooklyn Park, Minn., custom molder that runs 23 TMC presses, agreed that quality and service are what new customers want.
``You've got some people that are going to look at the price and say, `OK, what's wrong with it?''' Wolf said.
Only the biggest Taiwanese machine makers even try to sell to North America because, without service and spare parts, the effort is doomed to failure, machinery executives said. Victor Taichung also makes metalworking equipment, and is the largest machine tool factory in Taiwan, Wan said. Its large size helps — Taichung distributor Fortune in New Jersey stocks more than $1 million worth of spare parts, and has its own Web site, www.fortune-cnc. com.
Sunbo's Lewis said: ``There's over 100 injection molding machine manufacturers in Taiwan, companies that you never heard of. What we call them is subcontractors. They will build a machine in a very small plant.'' They buy components from suppliers and slap the machine together, he noted.
``That kind of quality could never go into the U.S.''
Why does Taiwan have so many small companies? Taiwan's laws make it easy to start a business, and the government does not step in to prop up failing ones, unlike many other Asian countries.
``Because of that the Taiwanese companies have been better able to withstand the Asian crisis, because they're smaller and more flexible,'' said Nariman Behravesh, chief international economist at Standard & Poor's DRI in Lexington, Mass.
``They didn't indulge in many of the excesses that many of the other Asian countries engaged in,'' Behravesh said, especially piling up foreign debt, like the large conglomerates in South Korea and other Asian countries.
But cultural factors are equally strong. In Taiwan, said Lewis: ``Many people want to have their own business. Even if it's a small business, it's viewed as much more successful than if you work for a larger company. It's much different than in, say, Japan,'' where employees enjoy fitting in with a huge company.
While Taiwan's economy is healthy, South Korea faces major challenges. Its new president, Kim Dae Jung, is trying to push through economic reforms to meet economic targets mandated by the International Monetary Fund, which has pumped in billions of dollars in emergency loans.
Korean machinery makers say they offer Japanese quality at a big discount. At NPE 1997, DongShin, via Promax, and LG International (America) Inc., which sells Goldstar machines, both introduced injection presses with two platens, one of the latest machine trends.
As the Asian tiger nations turn into pussycats, Korean companies are looking to compensate by selling more presses in other parts of the world, according to S.K. Kim, director of LG's machinery division in Englewood Cliffs, N.J.
``They are doing a kind of export drive to North and South America, instead of Southeast Asia,'' Kim said.
Although Korean companies can source more parts from inside Korea, including valves, screws and high-quality domestic steel, the country still depends on importing most of its raw materials, such as iron ore and petroleum, Kim said.
LG International has cut the price of Goldstar presses about 10 percent.
In the U.S. market, Taiwan and South Korea remain miles behind giants Japan and Germany, according to Department of Commerce statistics. Taiwan and South Korea shipped a total of 176 injection molding machines for thermoplastics in 1996, the latest full-year figures available from DOC.
In comparison, U.S. firms imported nearly 3,000 presses from Japan and Germany during that same year.