CHICAGO KSM Castings Group GmbH is looking to benefit from expected strong long-term demand growth for aluminum automotive castings in the United States with its new facility in Shelby, N.C.
Growth will be driven in part by stricter fuel economy and emission standards in the United States, something which should benefit aluminum usage in the automotive sector, Stefan Tyman, head of business development at the Hildesheim, Germany-based company, told AMM in a recent interview. "We also have strong demand from European customers who have a manufacturing footprint in the United Sates and want (KSM) ... to supply them on a local scale."
KSM, which is owned by Chinese wheel manufacturer Citic Dicastal Co. Ltd., already has manufacturing operations in Europe and in China, and a facility in the United States will give the company a global presence, he said.
The company plans to build a $45-million, 110,000-square-foot facility expected to be up and running in 2014 (amm.com, Feb. 6). The operation will sport new equipment and include die-casting, melting and machine shops, as well as a shipping area and office space, Tyman said.
The new plant initially will focus on transmission, engine and steering parts, but the site has room for growth and the plant could one day be expanded to include, for example, chassis and body applications, Tyman said.
Among KSMs key customers are Volkswagen AG, which has manufacturing operations in Chattanooga, Tenn.; Mercedes-Benz U.S. International Inc., which makes vehicles in Tuscaloosa, Ala.; and BMW AGs plant in Spartanburg, S.C.; as well as parts suppliers such as ZF Groups transmission plant in Gray Court, S.C. "Fifty-percent is push by our customers. Fifty-percent is pull by us," he said.
In addition to its existing customer base, KSM also hopes to do business with other U.S. automakers as well as Asia-based automakers with operations in the United States.
KSMs U.S. plans could be bolstered by its strong relationship with ZF, which offers an eight-gear automatic transmission. "As (ZF) grows and increases their market share, that is also a direct opportunity for us to increase our business," Tyman said. "And we see a lot of American manufacturers exchanging 4- and 5-gear shifts with automatic transmissions with more gears."
KSM expects American automakers could be pressed to increase aluminum usage because of tighter emission standards or because of performance advantages offered by the metal, he said. "We think there are some serious considerations for Chrysler (Group LLC) and GM (General Motors Co.), for example, increasing their aluminum share. ... We encourage them to do that."
KSM chose to locate in North Carolina because it wanted a manufacturing base in the North American Free Trade Agreement region and because much of its existing customer base is in the southeastern United States, Tyman said.
North Carolina won out over sites in Alabama and Kentucky in part because, not being in the "Deep South," it offered the possibility of supplying automakers in the Midwest, Tyman said. The state also sports a skilled work force and is looking to regain its status as a "manufacturing powerhouse," something KSM would like to be a part of, he said.
KSMs U.S. plant is expected to create about 190 to 200 jobs in North Carolina initially, Tyman said. If all goes to plan, the U.S. facility will be similar in operation and culture to KSM plants in Europe, which generally employ as many as 500 to 600 people.
But Tyman cautioned that KSM plans to expand gradually in the United States. "This is a very strategic project, so we dont expect payoff after year one," he said. "We would like to have our first plant established and then revise our strategy after four or five years."
KSM initially will focus "100 percent" on aluminum in the United States, sourcing metal locally, Tyman said. Transmission and engine parts generally are made from secondary aluminum, while KSM uses primary aluminum for chassis and body applications. The company makes some products that require magnesium, Tyman said, but magnesium "is not something that we would consider in the United States in the first phase."
While KSM does not intend to expand in the near term, there are several triggers for further expansion, such as increased requirements from a customer or demand for additional partssuch as lightweight chassis, steering knuckles or wheel carriersthat would require different production processes and equipment than the high-pressure die-casting machines planned to be installed in the Shelby plant in the first phase, he said.
"The site we have chosen offers a maximum expansion of four times the initial production area," Tyman said. "But dont ask me when that will happen. ... A 440,000-square-foot building by 2025? That would be very unlikely."
Still, KSM is committed to its U.S. expansion. "We know this (new plant) requires huge effort. ... But we are ready for it," he said.