With the transition to EVs, Hiruta Kogyo is looking to solidify its presence in the market through the production of quality yet essential suspension components.
Over the past 25-30 years, Japan has seen the rise of regional competitors who can replicate certain manufacturing processes and products from Japan at a cheaper cost, pushing Japan out of mass industrial markets. However, we still see that many Japanese firms are leaders when it comes to niche B2B fields. How have Japanese firms been able to maintain their leadership despite the stiff price competition?
If a buyer says that production can be done at a lower cost in China, we research why it can be done at a lower cost. Then, we will produce in China and move up the ladder.
Japan has the oldest society in the world and a rapidly shrinking population, presenting two major challenges for Japanese firms. The first is a labor crisis and the second is a shrinking domestic market. What are some of the challenges and opportunities this demographic shift is presenting for your company?
As you know, we have a factory in Indonesia and when we look at the structure of society in there, it is totally different from Japanese society because they have many young people and Indonesia is having a population explosion, or as they call it, a population bonus. What we are doing is identifying more business opportunities in growing markets such as Indonesia because we cannot have big expectations for the Japanese market. As the average age of Japanese employees goes up, it means we have more experienced and skilled workers, so we are going to create an opportunity for them to take advantage of their experience and skill outside Japan. It is OK for me that our employees become mentors, but obviously you cannot have knowledge about what is going on in a factory without working in one, so we should not move those people too far away from a factory.
You have multiple overseas operations in Thailand, China, Mexico and the United States. Nations with different skills and equipment, which can affect the final outcome of a product. How are you able to ensure the quality of your products in your overseas operations?
We try not to depend on the skills of each worker, so we set up great hardware tools or environment. Obviously, if there were 100 people, not all of them would be suitable for our manufacturing monozukuri, as some easily get bored. Some are quite patient, which is a good quality for monozukuri, so it is important for us to identify the right people for manufacturing.
Hiruta Kogyo is involved in the automotive sector, which is in a time of great change with the switch to EVs from gasoline vehicles. As a result, many components of traditional vehicles will no longer be needed, such as the internal combustion engine. What are some of the threats the switch to EVs poses to your firm, and how are you overcoming them?
In general, suspension parts will be used in EVs but there are some parts that will not be needed, such as transmission parts, but we have to accept that reality. Instead, we need to cover a wider range of items. For example, we are working on a deck crossmember in the dash panel, as well as the piping parts under the seats, and we are trying to increase the volume of production for these items. The steering and pedal parts will be attached to the support member assembly.
EVs need charging stations, so that is an area we need to look at. Also, these changes are not happening at once, but they are happening gradually, so I think we have got time to catch up with this trend. In Japan, there was a prediction that there would be rapid change over the last 10 years, but it did not happen as predicted, but it is going to happen from now on. Looking at the Japanese market, only Nissan and Mitsubishi are successful in EVs.
One other trend we are seeing as a result of the changes in the automobile industry is the emergence of newer, more lightweight materials to offset the weight of the lithium-ion batteries. Instead of using ferrous metals such as iron, we are seeing uses in alternative materials like aluminum, magnesium and CFRP. What have been the effects of this change in materials for Hiruta Kogyo?
We used to use general steel in our products but now it has been switched to high tension steel. More aluminum is used as a material, but obviously carmakers cannot increase the price of their cars so easily so we need to think about a balance - how much we can increase the price and how much we can use the new lighter materials. It all comes down to the right balance.
Your product range can be divided into 5 different divisions: chassis parts, proprietary parts, engine parts, transmission parts of course, and suspension parts. Which product division are you currently focusing on?
I think we have a difficult future ahead for transmission parts, so now we are focusing on suspension parts.
You offer a variety of automotive parts, from steering columns to air purifiers and engine parts, clutch components and suspension parts. How are your automotive parts superior to those of your competitors?
For suspension parts, I think our strength is in our cost competitiveness, and that is because we have experience with Mitsubishi’s lighter, smaller cars which contain small, inexpensive parts. If they were not inexpensive, then Mitsubishi would not be able to beat Daihatsu, KIA or other competitors. We developed ourselves because of the hard experience we earned at Mitsubishi light cars.
Are you looking to add more international clients to your portfolio?
In our industry, we would of course like to work with international customers if the opportunity arises. Experience matters in this industry. Based on experience, they place orders, so we need to do a lot of things to gain some of it.
Actually, we are working with the Chinese carmaker Beijing Motors. If we work with them for 20 or 30 years, that will serve as good experience and maybe we will have more opportunities to work with other Chinese car makers. Our Indonesian plant is also receiving orders from Suzuki. No Suzuki related companies launched businesses in Indonesia, so that is why we have that opportunity with them, so that we can make our business opportunities bigger.
Your company was founded in 1928 and has since become a quality manufacturer of automotive parts. Can you give us some of the key milestones in your history that have allowed you to be so successful?
About 40 years ago, Mitsubishi Motors was bigger than Honda. More successful. In a way, we were trained by Mitsubishi Motors because in the past, Mitsubishi Fuso was also part of Mitsubishi Motors, so we produced truck parts as well. We learned a lot from Mitsubishi Motors having worked with them for a long time.
One of the strengths of your company is, of course, your integrated production process. Could you elaborate more on your integrated production process for our readers?
If you are a dedicated or expert part maker of specific items such as brakes, that is one way to survive. You would try to be a first-class brake manufacturer. If you choose to go that way, you would only use a limited amount of equipment for 50 or 60 years, but if you wanted to be more of a general manufacturer, you would need to purchase different equipment and have the technology and know-how to create the features that would put you in a better position.
What would you say is your main competitive advantage as a company? What makes you different from your competitors?
Our strength is flexibility because if your company is focused on body parts and you have no painting process, you just focus on spot welding only, but we have a large variety of product divisions so we can provide arc welding and painting as well.
If we have more processes, more steps, that means we have more opportunities. For example, we are working with Daikin, the air conditioner manufacturer, and we provide tank parts for them. What we are doing is processing thick plates into a spherical shape. We provide machining and welding for that, and we received orders from Daikin because of our experience.
The COVID pandemic over the last few years has disrupted global shipping logistics as well as supply chains. Quarantine measures have impacted human resources and with the near tripling of oil prices, 77% of international couriers reported delays last year. How did these disruptions in global supply chains, shipping and logistics affect your business and how did you overcome them?
In response to the disruption to supply chains and logistics effecting carmakers, what we need to do is adjust to the changes in production volume and orders from those car makers. Our worst period was in spring 2020. Some employees only needed to come to work one day per month, and we also used some government funding to retain our employees.
What role does collaboration and co-creation play in your business model, and are you currently looking for any overseas co-creation partners?
We have been involved in a lot of co-creation projects. For example, when we opened our factory in Thailand, the Thai government did not allow foreign companies to own 100% of the shares of car parts companies, so we established a joint venture with a local Thai maker, Summit Auto Body (SAB), and we have maintained that relationship to this day. We have been working with them for more than 30 years and I have seen great growth in their company. Their founding family included some politicians, and one of them had served as vice-president of Thailand.
However, we have no projects in front of us right now because we are working to cover orders from the overseas plants of Mitsubishi Motors and Mazda. We need to fulfill their needs first.
Moving forward, what other countries or regions have you identified for further expansion into, and what strategies would you employ to do so?
I am not sure if you could call it a strategy. We had actually established a joint venture in India, but we had to withdraw from it. It is easy to start, but it is difficult to continue a business successfully, so at some point if things do not go well, we have to give up. What we are thinking is that if there were an opportunity, we would grab it.
Which market do you identify as having the most growth potential for the company?
The answer will be different depending on when the future is - 10 years from now or 50 years from now. We do not need to think 50 years ahead, so when we look at the next five years in terms of our client view, perhaps Thailand and Indonesia have high growth potential, but it depends on how our clients, the car makers, are thinking and seeing things. For example, Nissan does not focus on Indonesia anymore. They withdrew their business from there, so it depends on which companies you are working with.
What is your next midterm strategy is to continue your corporate growth?
Since we have so many competitors working on the same product, our technology needs to exceed theirs. For example, Nissan gave some funds to Mitsubishi Motors, which means we need to compete with Nissan related companies. Usually, people tend to think that if the scale of a company is bigger, it has more power or ability, but obviously Nissan is bigger than Mitsubishi Motors right now, so people might think Nissan related subcontractors are more powerful than Mitsubishi ones. We do not think so. We think we are equal to them.
When you look at the car industry, if companies are as big as Toyota, they are capable of developing and launching new cars every year, but that is not the case for Mitsubishi. New technologies are not implemented without the development of new cars. Toyota can launch a new car every year only using Japanese Toyota plants, but Mitsubishi Motors launches new cars every year with their global Mitsubishi plants. In order to develop new technology, we need to have the opportunity that the development of new cars brings. It is important to develop a sales channel other than Mitsubishi Motors.
What in-house technologies do you consider key for the growth of your company?
We believe that our arc welding techniques are highly evaluated, and that has led us to growth. Our plants were damaged by the torrential rain that hit the western part of Japan, specifically the line producing pipe parts that change the size of the piping, making it thinner or thicker.
We are not able to produce those parts as before because of the damage caused by rain. At the time, people realized that not many others can produce those parts like we do. That led to improved evaluations of our performance. If we change the size of the pipe parts, then you will not need as many parts. Maybe you cannot call it new technology, but technology is definitely key for us.
Is there any new product that you would like to share with us?
This assembly is for trucks. Obviously, it is quite heavy. Our strength is the technology for making these assemblies lighter. This is one of our extra technologies. Usually when we determine the thickness of an item, we think of the highest load, but there are some areas that would not need such a load, so for those areas we make it thinner. It is hard to tell from the appearance of the products.
Imagine we come back to interview you again in six years' time. What would you like to have achieved by then?
In 2000, Daimler started to work with Mitsubishi Motors, but they stopped their alliance after just three years. Now Nissan has given some funds to Mitsubishi Motors, which experienced a tough 20 years because of their mileage scandals. That led to a difficult business environment for us. Therefore, what we have been doing for the last 20 years is protecting the jobs of our employees. To make that happen, we have been trying to reflect, and implement ideas and knowhow to our product. In this tough business environment, we started to work with Suzuki as well as Beijing Motors, and we want to continue to value each customer. We now have a wider customer base, so what we want to do now is value each customer and we want to grow.