ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Business

Daikin's new US factory to head global expansion

AC maker watchful of Trump's policies as it pushes US production, energy standards

Daikin's new Texas factory will gather production technology from around the world.

WALLER, U.S. -- The world's largest air-conditioning manufacturer, Daikin Industries, is developing a strategy to become a truly global company, opening a $410 million Texas facility on Wednesday and a lobbying office on Friday to promote energy-efficiency standards in Washington, D.C. 

"We cannot become an excellent global company without recognizing the birthplace of air conditioners," Daikin Chairman Noriyuki Inoue emphasized at the event in Waller, Texas. The ceremony was attended by over 400 people including former Japanese prime minister Yasuo Fukuda and the former U.S. ambassador to Japan John Thomas Schieffer, a Texas native.

First stop, the US

For Daikin, however, America is a weak point despite it being the world's largest air- conditioning market, holding about 24% of the global share. The company ranks fourth in the country behind domestic manufacturers like Carrier and York International. 

The operating margin for Daikin's U.S. unit was about 10%, more than 11 percentage points lower than its competitors, before amortizing goodwill from U.S. subsidiary Goodman Global, which was acquired in 2012. Since U.S. operations were not contributing much to earnings, it was necessary for the company to make a move.

"[The factory] is central to our global business," explained Inoue, who considers the factory to be the starting line for Daikin's global development. The company will apply the techniques used in its Texas factory to production lines around the world in India, Vietnam and elsewhere. 

The new factory will consolidate the operations of four factories operated by Goodman. The factory will be a mega-factory covering 370,000 square meters, one of the biggest even in the U.S. By March 2019 the company plans on doubling the number of workers to 8,000 and increasing production capacity to 3 million units.

The factory "will incorporate all of our production technology," said Inoue, referring to knowledge gathered from Daikin's numerous global acquisitions.

The company will introduce unmanned transport devices from its low-cost factory in the Czech Republic and safety techniques from its Chinese factories. The state-of-the-art production lines will be able to quickly adjust production and detect defects.

Labor accounts for about 7% of air-conditioner production costs, but the Texas factory is advantageously positioned in the world's largest market. "We can get a step ahead of the competition by integrating development, manufacturing, marketing and logistics," explained Goodman CEO Takeshi Ebisu.

Getting Political

Daikin also opened an office in Washington, D.C., for lobbying activities. "We want to expand the energy-efficiency standards that we pride ourselves on in America," said Inoue. If Daikin can include itself in industry rule-making, which has been led by U.S. companies, that could provide a tailwind for achieving its goal of standing atop the U.S. market.

The new office will also pay attention to political events. Daikin also has plans to enhance its parts factory in Mexico that supplies the U.S.

The company is targeting consolidated sales of 3 trillion yen ($26.8 billion) and operating profit to 360 billion yen by fiscal 2020. Those are lofty goals that both exceed fiscal 2016 figures by 50%. To clear such high hurdles, Daikin will have to expand its share using its new factory and establish an easy environment to sell its products in.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media