Shipping Risks Bring Manufacturing Back to U.S.

Flags at a Fuyao facility in Ohio (Jeff Hoagland / twitter)

Published Oct 7, 2016 6:30 PM by Reuters

Chinese auto supplier Fuyao Glass Industry Group will complete a total of $1 billion in U.S. manufacturing investments by the end 2017, including about $500 million it has put into an automotive glass plant in Ohio, the company's chairman told Reuters.

Ahead of the ceremonial opening of the Moraine, Ohio plant on Friday, Fuyao Chairman Cho Tak Wong said Fuyao has started renovating an industrial building in Plymouth, Michigan, outside of Detroit. Cho said Fuyao will invest about $100 million there and employ "at least 1,000 people." That plant is set to open by the end of 2017, Cho said.

"Once the Plymouth plant is complete we will have invested $1 billion in North America,” Cho said.

On Friday, Cho plans to lead the celebration of the $500 million investment in the old GM plant, which now employs more than 2,000 workers and will have as many as 2,500 by the end of next year.

Fuyao's ceremony comes at a time when the loss of U.S. factory jobs to China and other countries is a major issue in the presidential election.

Cho said his company's decision to establish factories in the United States was driven by executives at General Motors and other automakers urging him to locate glass production near their U.S. vehicle assembly factories.

"For our customers, they had the expectations that you will be located close to them for supply chain stability,” Cho said. "If you ship from China, it is subject to all sorts of disruptions such as weather or shipping company delays."

Production at the Moraine plant, near Dayton, will allow Fuyao to double its current 12 percent share of the U.S. automotive glass market, said John Gauthier, president of Fuyao Glass America.

Fuyao bought the old GM plant for $15 million, got more than $10 million in tax credits and infrastructure enhancements from the state of Ohio, and was able to cut costs and speed the start of production, compared to building a plant from scratch.

"It probably reduced the costs by half and the timing by half," said Gauthier, the company's highest-ranking U.S. executive.

Fuyao holds 20 percent of the global market, making it among the two leaders, in large part because it commands 70 percent of the world's biggest new vehicle market in China.

Fuyao also has invested about $250 million in a float glass plant in Illinois that employs about 250 workers.

Cho, 70, maintains an office at the Ohio plant with a large walnut desk imported from China and a painted portrait of the chairman as a younger man. His main office is at Fuyao's headquarters in Fuqing on China's southern coast.

The Moraine building Fuyao is using once was a GM assembly plant that at one time employed more than 6,000 people.