TOKYO -- Hitachi Construction Machinery will stop manufacturing equipment in Europe by the end of next year and switch to exports from Japan, seeking to consolidate production and compete more effectively.
The company will close its Oosterhout plant in the Netherlands, which produced about 4,000 mini hydraulic excavators -- a Hitachi Construction specialty -- in fiscal 2019. Orders for the European market instead will be shipped from facilities including the Shiga plant in western Japan.
The change comes as competition intensifies with the likes of U.K.-based JCB and Sweden's Volvo, pushing the Japanese company to become more cost-efficient.
Hitachi Construction has handled production in Europe completely locally, from parts procurement to final assembly, since the Oosterhout facility opened in 1972. But the manufacturer has fared worse there than in other markets, holding a 7% share compared with about 20% in North America. It often makes small lots to order for customers, and this has contributed to rising production costs in recent years.
Talks have begun with labor unions about the closure. Hitachi Construction plans to transfer the plant's 115 employees to its Amsterdam facility, which handles repairs and customization.
The company is restructuring its manufacturing network in Japan, aiming to boost capacity for hydraulic excavators by 7% to 45,000 a year by fiscal 2022. Exporting from locations where large numbers of a given equipment model can be produced at once will reduce costs.
Efforts are underway to limit the expected rise in transportation costs, such as sharing shipping containers with building materials supplier Lixil Group at the Mie Prefecture port for exports from the Shiga plant. Avoiding empty space can slash shipping expenses by 20%.
Hitachi Construction began restructuring production in North America and India as well in 2018, aiming to lower its cost-to-sales ratio to 70% from the fiscal 2015 figure of 76%.