The US bearings maker Torrington has opened a 20 million plant in Olomouc, Czech Republic, as part of its strategy to expand in Europe.
Europe once accounted for only 10 percent of Torrington's automotive parts volume. About 60 percent of global volume has been in North America with another 30 percent in Asia including a joint venture with Japanese bearings maker NSK.
Torrington is No. 1 in automotive bearings in North America and Asia but falls below German rival INA's 60 percent market share in Europe.
The Czech investment follows Torrington Europe's acquisition of Nadella in France, formerly a joint venture between Torrington and SNR Roulements of Annecy, France.
Including Nadella, Torrington's European volume grew to 300 million last year, a quarter of the supplier's 1.2 billion revenue.
Torrington plans to boost European sales to over 500 million by 2005 with output from the Czech plant and Nadella and potential additional acquisitions.
Torrington also favors alliances to improve its position in the modules and systems market. Torrington and Delphi formed a steering systems alliance in April. By becoming Delphi's premium supplier of shaft products, Torrington hopes to sell intermediate shaft products to module customers it might not have reached otherwise.
More than 90 percent of the new Czech plant's production will be exported. Most output currently is shipped to a Torrington sister company in Germany.
Torrington expects to diversify its customer portfolio as more automakers invest in the Czech Republic. Mohammed Zammeer, Torrington operations director for Europe, said the company hopes to supply the Toyota/PSA/Peugeot-Citroen small-car joint venture in Kolin, Czech Republic, when it opens in 2005.
In addition, the Olomouc plant will supply non-automotive parts to future Czech subsidiaries of Ingersoll Rand, Torrington's parent company.
Torrington has also established a technical center in nearby Brno to provide engineering support to the Olomouc plant.
Nearly all the employees in Brno were recruited locally, said Ian Marsden, managing director of Torrington Europe.
Torrington was attracted by the Czech Republic's long history in bearing engineering, said Chuck Byrnes, director of automotive sales and marketing in Europe.
Czech wages are around a third of those in Germany. Brynes said Torrington 'wants a balanced cost base' in Europe. It favors low-wage countries for labor-intensive products. Technical expertise and proximity to customers are also priorities when choosing production sites, he added.
Torrington is also targeting Russia. It recently secured some high-volume business with an unnamed Russian vehicle maker and plans to begin manufacturing parts for the automotive industry at a plant in Pavlovo, Russia.