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Kaiser Takes Aim At Auto Market With German, Japanese Alliances Company Hopes To Tap Demand For Aluminum Parts For Cars

Fri., Feb. 10, 1995

Kaiser Aluminum Corp. has taken another step in a strategy to make the company a significant player in the world automobile industry.

The company announced last week that it has formed a strategic alliance with a German company that will offer Kaiser access to the European automobile market.

During the past two years, Kaiser has formed similar relationships with companies in Japan.

“We believe that the automobile market represents the single largest growth market segment for aluminum products over the next several years,” Michael Venie, Kaiser’s vice president of automotive marketing, said in an interview this week.

Kaiser is trying to position itself to produce extruded and forged parts in all the world’s major auto markets, as well as provide aluminum sheet alloys for auto body panels.

“And that has significant implications for our Trentwood facility over time,” said Venie. “As we are successful in developing the (body panel) products, Trentwood is really the only facility Kaiser has to produce them.”

Last week, Kaiser announced the signing of a strategic alliance with Hoogovens Aluminum Profiltechnik GmbH, a German manufacturer, for the development and marketing of soft-alloy extrusions for the automotive industry.

A news release said the two companies will “identify and jointly undertake research and development projects and investigate worldwide opportunities and strategies in the aluminum extrusion business.”

The extrusion process is something like squeezing toothpaste through a tube. The aluminum metal takes the shape of a die through which it is pressed.

According to Venie, products containing extruded aluminum include anti-lock brake systems and passenger-side airbag containers.

Two years ago, Kaiser formed a joint venture company in Japan called Furukawa Kaiser Forged Products Inc., which concentrates on the design and sale of forged products to the aluminum industry.

The forging process shapes aluminum by squeezing the metal between two dies. Forged auto parts include engine mounts, engine brackets, suspension parts, and the canister that holds the drivers’ side airbag and propellant.

In addition, Kaiser formed a research and development alliance comprised of Kawasaki Steel - a major Japanese steelmaker - Kaiser, Furukawa and the Pechiney Group in France.

“It’s a global alliance encompassing the three major auto manufacturing sectors in the world (North America, Asia and Europe),” said Venie. “Its purpose is to develop superior aluminum sheet for automotive body panel applications.”

Without these alliances, a relatively small company like Kaiser would have difficulty gaining entry into some of these markets, and being a player in the automotive industry is going to be very important to the future of any aluminum company.

Just a few years ago, Venie explained, the average aluminum content of an automobile was 120 pounds. Today, it’s 200 pounds, and many experts feel within a very short time that content will increase to 500 pounds per car.

When you start multiplying that by the numbers of automobiles produced each year, the market potential is vast.

“The auto industry has literally become globalized,” Venie said. “General Motors has facilities in Europe and Asia, the Japanese have assembly operations in the United Kingdom and other parts of Europe, as well as North America.”

What each company wants, he says, is to be able to build its products in every different location according to the same specifications. So they would like standardized materials worldwide.

By developing alloys and processes jointly, Kaiser and its partners can offer that standardization.

More importantly, the alliances give Kaiser access to markets and companies that might otherwise pay a small aluminum maker little heed.

“We are looking at investment opportunities throughout the world as both end-use markets and geographic markets dictate,” said Venie. “But having said that, when we look at the automotive market, we see that Toyota, for instance, has a very secure supply base in Japan that knows what they want.”

But by forming the alliances, Venie said, Kaiser gains access to the Japanese companies’ operations in North America “that would be much more difficult for us to establish on a standalone basis.”

The Hoogovens alliance will offer the same opportunities.

“They have customers in Europe that have operations in the United States,” Venie said. “We have customers in the United States that have operations in Europe. We don’t have facilities there, and they don’t have facilities here, so we don’t compete with each other.

“But we have a common customer base, so it just makes sense to cooperate in areas like research and development and marketing strategy.”

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