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September 08, 2008 02:00 AM

Asahi Kasei plans Southeast, Mexico sites

Frank Esposito
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    A slowdown in the auto market isn't slowing down Asahi Kasei Plastics North America Inc.

    The Fowlerville-based compounder will add its ninth extrusion line in 2009 and plans to have new plants up and running in the southeastern United States and in Mexico by 2015. These big growth plans might be a bit surprising for a firm that generates more than half of its $200 million in annual sales from the automotive sector, where sales continue to slump.

    ``We do a lot of business with transplant automotive companies, both Asian and European,'' President John Moyer said in a recent interview in Fowlerville. ``But we still maintain a strong business with the domestic automakers as well.

    ``The transplant business has held up better, and that's one of our strengths,'' added Moyer, who joined Asahi Kasei in 2005 after a 24-year career with Dow Chemical Co. ``We have a lot of long-standing business relationships in Japan. And even though 2008 has been a tough year, we're still in good shape when you look long term.''

    Those relationships stem from the firm's parent — Asahi Kasei Corp., a Tokyo-based maker of plastics and chemicals that posted sales of $17 billion in 2007. Asahi Kasei bought the business — first known as Thermofil Inc. — from Nippon Steel Chemical Co. Ltd. of Tokyo in 2000.

    Opening new plants in Mexico and the U.S. Southeast is necessary to serve Asahi Kasei's customers in automotive and other markets, officials said. The new locations also will reduce the firm's freight and logistics costs.

    ``Logistics is a strong motivator for us to be in the Southeast,'' Moyer said. ``As for Mexico, we just really need to be there.''

    Officials now are deciding if it's better to build new plants or acquire existing businesses with a built-in customer base. However, each new plant ideally will have compounding capacity of 40 million to 50 million pounds and will employ 35-40, although they will start at lower levels.

    Moyer and Executive Vice President Satoshi Miyamoto recently visited Mexico to scout potential locations. Asahi Kasei generates about 80 percent of its sales from the U.S. and Canada, but has set a goal of doubling its sales in Mexico and Latin America.

    U.S. states being considered for the new plant include North and South Carolina, Georgia and Tennessee.

    In Fowlerville, the new line will have capacity of 10 million pounds a year, focusing on compounds based on engineering resins. Asahi Kasei's annual sales of engineering resin compounds have climbed from zero in 2001 to around $50 million today. The new line also will sell less output into the auto field than Asahi Kasei's existing lines.

    ``We don't want to reduce our existing auto business,'' Moyer said. ``But we want to grow our other businesses at a faster rate. In the long run, that will have the same effect of reducing the percentage of automotive work that we do, but we're not moving away from any of our current automotive work.''

    Materials compounded on the new line will include Leona-brand nylon 6/6, Tenac-brand acetal and Xyron-brand polyphenylene ether — most of which are imported from Asahi Kasei plants in Japan. Uses for the firm's nylon compounds include automotive connectors and clips, and electrical/electronic cable ties and heater covers.

    Products using Asahi Kasei's acetal compounds include automotive door-lock housings and window guides, and electrical/ electronic snap buckles and gears.

    The PPE often is alloyed with nylon, PP and polystyrene and sold into products like auto body panels, mirror shells and tractor hoods, and electrical/ electronic pool and spa parts.

    Compounds made on the new line will include high flame-retardant materials that will compete with PVC in furniture and other products, according to technology director Deen Chundury. Chundury joined Asahi Kasei in 2007 after a lengthy career with the plastics business of Cleveland-based Ferro Corp.

    Polypropylene remains the largest-volume material compounded in Fowlerville, accounting for more than half of the site's 280 million pounds of annual capacity. PP compounded in Fowlerville is sourced from North American suppliers.

    Asahi Kasei's base PP compounds — sold under the Thermylene name — continue to benefit from the push to replace more expensive resins with PP, said auto segment director Ramesh Iyer. Recent PP compound applications include auto fan shrouds and battery boxes and electrical/electronic small-engine covers and air-filter housings.

    ``There's been a resurgence in using polypropylene and other plastics in ways they hadn't been used before,'' sales director David Vranesich said. ``People are taking another look at projects they may have given up on.''

    Asahi Kasei also does a good bit of business in the pool/spa sector, which includes water-filtration equipment. Although generally viewed as a luxury item, that sector has held up at the high end, according to Moyer, and is benefiting from metal parts being replaced by plastic.

    The firm also has had some success in passing along recent resin price increases to its customers, but the high-priced environment has caused Asahi Kasei to make some changes to its raw- material management.

    ``We're more watchful of pricing and may do some buying when we can,'' said operations Vice President Prasad Puttagunta. ``We're also managing our inventory levels a little more closely than we used to.''

    Asahi Kasei's Fowlerville site was built in 1999, after a fire destroyed most of the firm's previous plant in Brighton, Mich., and it was expanded in 2003. The plant now covers 200,000 square feet, with an additional 20,000 square feet for offices and labs. It employs 150.

    The site includes a rail siding that can accommodate more than 30 rail cars and 18 resin storage silos with storage capacity of more than 3 million pounds.

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