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Korean Tubing Supplier Finds Home in Zacatecas

Takeshi Yoshida - Koide


Mon, 09/01/2014 - 17:31

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Koide, a supplier of precision steel tubing products for Japanese OEMs, first entered Mexico in 2011 through a US$2 million investment to support the expansion of Japanese automotive interests in the country. It was not Koide’s first foray into North America, as it expanded its cutting and machining division with a plant in Tennessee back in 1998. Takeshi Yoshida, President of Koide Mexico, explains why Zacatecas was selected to open a plant. “The first reason is that one of our immediate customers, Yusa, is based here, while Zacatecas also offered attractive incentives. Finally, we want to remain a medium-sized company and being in Zacatecas means that we do not have to compete for personnel with larger companies in the major industrial clusters of Guanajuato or Aguascalientes.” Although the initial orders from Koide’s customers in Mexico justified starting up one plant, the company quickly saw the demand for its tubing products far outstripped its expectations. Yoshida states that more Japanese automotive companies came to Mexico than expected, leading Koide to begin building a second facility in 2013 at a cost of US$7.5 million. The company has been regularly bringing new production lines to Mexico and is currently churning out around 3 million pieces a month. “Koide is focusing heavily on growing its tubing business, which has huge potential in Mexico,” says Yoshida. The company currently imports raw materials from the US and Japan, but is trying to get its own suppliers to bring their manufacturing here. “The pieces we require for our tubing products come in a vast array of sizes and dimensions that all go toward our anti-vibration devices for the automotive industry. This creates a large opportunity for suppliers to work with us.” Koide currently sources 40% to 50% of its content from Mexican suppliers but is committed to increasing this number. “In Mexico, our production costs represent 70% of the product’s final price so we are looking at how to optimize the production time, which machines could help us speed up the process, and how to reduce inventory. Increasing local content is also a part of this process as freight costs when importing materials from Asia are high. Our customers understand the necessity of these imports so they still pay for these freight costs. But as the Mexican market grows stronger over the next two to three years, they will no longer be willing to do so,” he says.

Currently, some of the raw materials used in Koide’s production process are difficult to find in Mexico, according to Yoshida. “Tubes are produced from coils that are welded together. After welding, the large diameter tubes undergo a tube drawing process, where they are fed through a die to reach a smaller diameter. Koide takes care of this process, as well as cutting and shaping the tubes, but we do not process the raw materials or make the tube ourselves. 

We have to count on suppliers for that and, unfortunately, there is very little access to the right raw materials here in Mexico,” he says. On top of that, he adds that most suppliers that do exist in Mexico have not been approved by OEMs, which means Koide cannot turn to them. Encouraging its Asian suppliers to move to Mexico has proved tricky. “Our suppliers know that the Mexican market is growing and that coming here would enable them to access a whole range of new customers for their products through Koide,” states Yoshida. “They are eager to come but since their manpower is limited, they have to choose their priorities carefully, between North America and Asia.”

Koide only brought two Japanese staff to work in Mexico, hiring over 70 locals to man its operations. Some handpicked Mexican staff will be sent to China and Japan this year to be trained on the latest cutting and sharpening machines and technologies for up to two years. During that time, it will update its operations here, with the trainees being ready to handle any new machines by the time they return. Yoshida explains that although the production processes in Japan and Mexico are virtually identical, the Mexican plant is less automated. Mexico’s labor costs have led to Koide using more employees on the production line but it is now looking to increase automation to be more competitive.

Koide will keep bringing more machines to Mexico until June 2014, a necessary consequence of growing from one customer to seven in three years. Koide has also brought over a sister company to Mexico to produce cold forging parts for the Mexican and US automotive markets. Yoshida explains that an investment plan has been outlined that would see this company’s plant open in the same industrial park in Zacatecas by 2015.

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