TORAY AIMS TO EXPAND IN CHINA
Byline: Tsukasa Furukawa
TOKYO — Faced with continued competition from imports, Japanese fiber manufacturer Toray Industries Inc. has sketched out a plan to expand production outside of its home country while focusing its domestic sourcing on high-end products.
The plan reflects the deepening sense of crisis in the Japanese textile and apparel industry, which is faced with the continuing contraction of business at home as a result of rising imports from China and other Asian countries.
Toray president Katsuhiko Hirai and chairman Katsunosuke Maeda told a recent meeting of top Japanese mill officials the company — the nation’s largest fiber producer, which outsources fabric production — would have to cut its new orders to contract textile mills by 25 percent in fiscal 2004 from the fiscal 2000 level if it continued with business as usual.
The executives emphasized that Toray is determined to hold the decline to 10 percent by changing production, developing new products and expanding into textiles for items other than clothing.
Toray, which recorded sales of $3.26 billion in 2000, aims to grow that number about 15 percent, to $3.76 billion by 2003. To do that, it plans to step up its purchasing of imported fabric.
(All dollar figures are converted from the yen at the current rate of exchange.)
Japan, once the world’s largest exporter of textile products, has turned into a major importer in the past two decades. Imports of textile products surged in fiscal 2001 to $17.08 billion and accounted for 75 percent of domestic consumption here, compared with 71.7 percent the previous year. In contrast, Japanese exports of textile products in 2001 fell 10.3 percent from the previous year to $7.5 billion.
A key part of Toray’s import plan is China, which a company spokesman said is becoming the “manufacturing plant for the world.” For many nations, China can be a double-edged sword: It is a formidable threat as a competitor, but can also be utilized as a huge manufacturing base to supply not only Japan, but the U.S. and Europe and eventually China’s own domestic market as the country grows affluent.
Toray has doubled its Japanese staffers in its Shanghai office to four in April, with plans to add more. Its aim is to provide support to its contract and affiliated mills to move their manufacturing operations into China.
“Some mills may find it difficult to move production overseas under their own power,” the spokesman said. “But they will be able to do so in partnership with Toray.”
The thinking behind this is to leave those products that can only be produced by Japanese-based mills in Japan, and move those product lines that can be more competitively produced to China and other Asian markets. China, following its entry in the World Trade Organization, has permitted Japanese textile companies to have warehousing operations in China. That is giving Japanese suppliers more flexibility and quick-delivery capability in the Chinese market.
Toray’s strategic plan also places an emphasis on stepping up research and development, the spokesman explained. The company aims to develop new types of polymer and yarns for production of specialty fabrics, which Toray hopes will carry a higher value than commodity items.
It is also developing products for non-clothing areas such as airbags, carbon fibers and biotechnology.
Toray is building a nanotechnology research laboratory on the compounds of its medical research laboratory in Kamakura, west of Tokyo, which, when completed next year, will be staffed by 100 researchers, the spokesman noted.
Nanotechnology can be used to dramatically and permanently change the performance of fabrics without altering their feel. For instance, Nano-Tex — an arm of Burlington Industries — has developed nanotechnology treatments to make cotton fabrics water- and stain-resistant.
Toray aims to focus its domestic production on these high-end fabrics for local consumption and for export.
The weakening yen is helping Japanese exports. The yen’s exchange rate has weakened to 133 yen to the dollar currently which, compared with the yen’s strongest point of 80 yen to the dollar in early Nineties, represents a depreciation of about 40 percent.
The fiber maker also hopes to use information technology to grow its business. Last year, it joined forces with fiber producer Teijin Ltd. and computer maker NEC Corp. to launch an e-commerce Web site that currently has 80 member mills that have conducted $26.3 million in transactions since launching in May 2001.
Toray produced 562,340 tons of fiber worldwide in fiscal 2000, with 52 percent of that outside Japan. The company expects its total production to rise to 607,690 by fiscal 2003, with Japanese production remaining flat and foreign production growing to represent 55 percent of its total.
The textile business plan is part of a larger two-year management plan, “Project New Toray 21,” for the entire Toray group, which has more than 200 subsidiaries and affiliates. The overall plan involves withdrawal from money-losing businesses, including the production of optical discs, consolidation of manufacturing facilities in Japan, reduction of the number of group companies by one-third and reduction of the group’s personnel costs in Japan by 10 percent over the next two years.
The company did not say how many jobs it planned to eliminate, but the spokesman said that past personnel reductions have focused on attrition and avoided layoffs.
In addition to fiber and textiles, Toray has operations in plastics and chemicals; electronics and information technology; housing and engineering, and medical products.