Canadian Plastics

Partnering in China Risk vs. reward

Is partnering with a China-based moldmaker or molder the answer to the ferocious off-shore competitive pressures continually building on the North American plastics manufacturing industry? The answer, at least according to two speakers at the CPIA...

May 1, 2004   Canadian Plastics



Is partnering with a China-based moldmaker or molder the answer to the ferocious off-shore competitive pressures continually building on the North American plastics manufacturing industry? The answer, at least according to two speakers at the CPIA Moldmakers’ Council Management and Technical conference, is a qualified yes.

One thing is certain: most Chinese companies are open to considering just about any type of partnering arrangement. At the recent Society of Automotive Engineers Show in Detroit, a number of Chinese molders were trolling for business, eager to crack the North American automotive market.

Why are China-based firms so keen to line up customers/partners in North America when, it is assumed, they have all the business they can handle walking through the door in the fastest growing economy in the world? As one executive at the SAE show speculated, maybe Chinese molders are being hit by competitive pressures on their home turf.

This is no doubt true. Indeed, a large number of China-based molders and moldmakers have never been profitable. With the Chinese banking system awash in unrecovered debt, one can assume that the government has sent out the message that free lunches are about to end. These companies not only need new customers, but need to acquire new capabilities, which in some cases are quite rudimentary. What better place to find those customers and acquire those skills than through a partner in North America.

This is the “what’s in it for them” part of the equation. The flip side to this equation, “what’s in it for me”, must of course offer a similar amount of benefits to any North American company mulling such a partnership. There are indications that such benefits potentially exist. According to Colin James, one of the speakers at the CPIA conference, the average wage for a CNC machine operator in China is about US$260/month. A CAD/CAM designer earns about US$325/month. Chinese moldmakers pay about $2.20/kg for locally made P20 tool steel, versus almost $9/kg for imported P20. Mr. James, managing director for the consulting firm Plastic Engineering & Technical Services, reported that many tooling and molding firms have realized that the best way to fight such pricing is to join in the market and use it as a base of cheaper sourcing.

Another speaker, Gordon Young, CEO of Reko International, said changing business conditions in North America manufacturing compelled his company to find Asian partners. There are fewer North American-based manufacturers. New product releases by automotive and industrial customers have been weak and/or delayed. Process improvements in the supplier base has improved productivity, resulting in over-capacity — for example, delivery time on molds has been reduced from 32 weeks to 18 weeks.

Reko’s alliance with an Asian moldmaker has given the moldmaker access to Asia-based OEMs such as Nissan and Honda. Reko has shipped over 100 tools from its Windsor plant to its Asian partner, according to Mr. Young. Most important, both Reko and their partner have made money. Young estimates that it would take the company 5 to 10 years, at a loss of several million dollars, to reach the same level of shipments to Asia without a partner.

If you do partner with a Chinese firm, you might want to consider choosing a company with headquarters in Hong Kong. According to Colin James, it’s the only area of China in which patent infringement laws are rigorously enforced.

Michael LeGault, editor

e-mail: mlegault@canplastics.com


Print this page

Related Stories

Leave a Reply

Your email address will not be published. Required fields are marked *

*