Victorian parts-maker makes gains in China

MELBOURNE-BASED parts-maker MtM Automotive Components has won seven new contracts to supply parts to Chinese car-making giant Shanghai Automotive Industry Corporation (SAIC) starting later this year.

The announcement came a day after Toyota Australia reported it would make its last Australian car on October 3 this year.

The MtM contracts will come on stream over an 18-month period starting in February and will insulate the company’s small workforce of 90 people against the shocks that will come with the closure of the Toyota plant on October 3 and Holden’s Elizabeth plant 17 days later.

MtM currently makes automatic transmission selectors and doorchecks for Toyota and GM at its plant in Oakleigh South, Victoria. It also produces the Tomcar ATV in its facility.

All the new contracts are for doorchecks and all were awarded by SAIC.

Doorchecks are the connections between the vehicle structure and the doors which prevent them from swinging around and hitting the bodywork.

SAIC has joint ventures with General Motors and with Volkswagen Group but also develops its own models under the Roewe and MG brands.

The first doorchecks sent to China will be installed in the Roewe RX5 suburban utility vehicle.

MtM managing director Mark Albert said that, while it was difficult to predict volumes, he expected the new contracts to amount to about 750,000 car sets a year.

“We have been knocking on doors in China for 10 years,” he said.

MtM started in China in a joint venture with a manufacturer of aftermarket parts, but the partners split amicably some time later.

MtM is used to being patient. It took seven years to land a contract with Cadillac in the US in 1997, a contract that is still in force 20 years later.

The new China contracts have required significant new investment for a small company. MtM has invested more than $1 million in the final assembly plant in China and a similar amount to expand its capacity at Oakleigh South.

In order to keep the Oakleigh South plant operating and to protect its intellectual property, MtM will make key parts of the doorchecks – the housing, the lever arm and the sliders – in Australia.

“We have installed an extra state-of-the-art plastic injection moulding machine with robotics at Oakleigh South.

“We needed the extra capacity because these contracts will give us volumes we have never needed to meet before.”

Mr Albert said there was a negative side to the new contracts. The long supply chain to China meant that MtM would have to carry more inventory on its books – at the Oakleigh South factory, on the water and at SAIC’s plants.

On the plus side, however, the current 10 per cent tariff on parts entering China under the China-Australia free-trade agreement will gradually be wound down.

He said the key to MtM’s success was its expertise in doorchecks, which the company has been making for almost 40 years.

When it became clear that vehicle production volumes were declining in Australia, MtM did not diversify or try to compete in high-volume products.

“We thought if we stuck to what we knew we could survive because we have expertise others can’t match.

“Under the free-trade agreement, if you try to compete on ‘me too’ products, you’ll get beaten every time unless you have the expertise.

“If you have specific knowledge, stick to that. And it might not be in the whole product, it may just be a specific element of the product.”