Auto-Parts Makers Invest in Mexico, China on Production Strength

By Jeff Bennett 

Three top auto-industry suppliers are investing a combined almost $500 million in two of the biggest vehicle production hubs -- China and Mexico -- in new signs of confidence that global demand for cars will continue to rise.

Milwaukee, Wis.-based Johnson Controls Inc. said Thursday it has formed a joint-venture with a Chinese parts maker to build its fourth automotive battery manufacturing plant in that country. The $200 million facility, slated to open in 2019, will employ about 650 people. The plant will produce both traditional and stop-start batteries. About 7.5 million batteries are expected to be produced annually. Johnson Controls is working with Binzhou Bohai Piston Co., an affiliate of Beijing Automotive Industry Group Co.

Nucor Corp. announced it has also reached a joint venture deal with Japan's JFE Steel Corp. to build and operate a plant in central Mexico to supply the needs of automotive manufactures there. The $270 million facility will have the capacity to produce 400,000 tons of galvanized sheet steel a year. Nucor is based in Charlotte, N.C.

Rounding out the investments, Robert Bosch GmbH completed the expansion of its Aguascalientes, Mexico, plant which doubles the output of automotive components such as anti-locking braking and electronic stability systems. The company invested about $21 million into the expansion.

The three announcements come a day after automotive seat maker Lear Corp. announced plans to build a new headquarters for its Asia-Pacific operations in Shanghai. The new building will house about 800 employees. Lear didn't disclose the size of the investment.

The expansions are being made even as the U.S. market, one of the biggest for new car sales, continues to show signs of slowing. Sales fell 6% to 1.54 million cars in May compared with the same period a year ago as the pent-up demand for new cars that had pushed sales since the financial crisis continues to lose steam. Full-year sales this year are expected to hit 17.7 million which would break last year's record of 17.5 million but is a bit softer than the original expectation of 17.8 million, according to analysts at LMC Automotive.

But Mike Mansuetti, president of Bosch's North American operations, said global automotive demand remains strong and many parts suppliers are positioning themselves to meet the rising demands from car makers to produce parts closer to their assembly plants.

Global automotive light vehicle production is expected to increase to 91.4 million this year, 93.5 million next year and 96 million in 2018, according to IHS Automotive statistics.

"We continue to see growth in the Asia-Pacific region and we are also seeing some niche increases in North America," Mr. Mansuetti said Thursday during an interview at the company's Farmington Hills, Mich. location. "Our philosophy is also to build what we sell locally and that is leading us to invest in the Southeast, Midwest and the Mexico markets."

Bosch is already working on expanding a steering wheel manufacturing plant in Florence, Ky. Bosch took over the plant last year after acquiring ZF Friedrichshafen AG's steering unit. The deal was cut so ZF could acquire TRW Automotive Holdings Corp. to create the second-largest automotive supplier in the world.

Mr. Mansuetti added that new technologies, such as automatic braking systems, are pushing parts makers to expand their product portfolios and offer more components.

Write to Jeff Bennett at [e-mail]

(END) Dow Jones Newswires

June 09, 2016 16:22 ET (20:22 GMT)

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