The auto parts industry's move to China and other low-cost countries is sweeping up a new wave of manufacturers: companies that do not have labor cost issues of their own but must move overseas to keep up with customers that do.
Palatine, Ill.-based Intec Group Inc. is among them. The injection molder has a successful international strategy, with operations in the United States, Mexico, Singapore and China, and a growing business overall. But the bulk of that business is coming from customers that are continually shifting their own production overseas, while contracts for U.S. manufacturing are dropping, forcing Intec to restructure to keep up.
Now the insert molding specialist is preparing to close one of its two U.S. plants at the same time it is opening a third site in China.
``Our type of business is not being driven by labor costs, but when you add in the logistics of shipping and the issues with extended [supply] pipelines, we need to be there,'' President and Chief Executive Officer Steven Perlman said in an Aug. 2 telephone interview. ``It is a situation of the [customers] pulling us along.''
Intec will begin closing its Morocco, Ind., plant in October, shutting the site down by Dec. 31 and ending 200 jobs.
At the same time, the firm will launch production at its new, 30,000-square-foot facility in Changzhou by the end of this year. That plant joins Intec operations there in Tianjin and Shanghai.
Intec is a classic example of the changing manufacturing climate, said Kim Korth, president of Grand Rapids, Mich.-based consulting group IRN Inc. It is a Tier 2 supplier making parts for customers such as Troy, Mich.-based Delphi Corp. that are under increased pressure to cut costs. That pressure leads suppliers to China and other low-cost areas.
To keep the business, companies like Intec have to follow the customer, Korth said.
``We always tell people that in planning for your global structure, you have to look at your customer's global structure,'' she said.
Intec has a vibrant international presence, which is attractive to its customers, Korth said, but most second-tier suppliers are not in a position to fight the changing global shift.
Closing Morocco was a hard decision, Perlman said. The plant, launched by his father, has been part of Intec for 54 years. It also is a major employer in the town of 1,000 residents.
``We have agonized over this issue and searched for any other solution,'' Perlman said.
Morocco actually ships parts from Indiana to China for assembly onto components that are shipped back to the U.S. for assembly into cars and trucks.
After the Morocco plant closes, Intec will move half of that business to Palatine. The company will move another 40 percent to its Guaymas, Mexico, plant and 10 percent to the new Changzhou site.
Perlman said Intec will not lose its identity as an American manufacturer. ``We intend to be a U.S.-based company,'' he said.