Even though the company faces some large and aggressive competitors, Michigan-based Toyoda Gosei Fluid Systems has staked out a strong position in its marketplace. President Scott Maly explains that the manufacturer of fuel lines, evaporative emissions systems and other fuel tank-related products is a trusted partner of automotive OEMs including Toyota, Honda and Nissan.
“For our niche, we have 24 percent of the market,” Maly says.
Originally founded as Eagle Picher in 1996, the operation was purchased by global manufacturer Toyoda Gosei in 2000, but the company already was working with major automakers like General Motors by the time of the acquisition. Thanks in part to the acquisition as well as the overall quality of its products, Toyoda Gosei Fluid Systems has grown from a $400,000-a-year business into one that regularly posts annual sales of $60 million, Maly says.
Toyoda Gosei has held nearly a quarter of the market for the past two years, and Maly says the company forecasts similar success for the next few years. The key to this success, he says, is in the company’s strategic location in the Midwest, a continuing commitment to automation and internal expertise. Even as the company faces challenges created by rising materials costs and strong competition, Maly says Toyoda Gosei Fluid Systems has the tools in place to continue to grow.
Local and Helpful
Maly says Toyoda Gosei Fluid Systems supplies the majority of auto manufacturers in North America, and its location in Brighton, Mich., is therefore one of its greatest strategic advantages. With many of its customers located in Michigan, Ohio, Indiana and Ontario, the company’s central location makes it easier for them to deal with Toyoda Gosei Fluid Systems. All of the company’s competitors are based in Mexico, according to Maly. Being closer to its customers means Toyoda Gosei Fluid Systems can serve them better from an engineering and quality perspective.
“They respect it and expect it,” Maly says.
However, that’s not the only thing manufacturers look for in a vendor, and Toyoda Gosei Fluid Systems has had to change its operations to help meet that need. “We’re very close to them, but it still comes down to cost, so we have to be cost-competitive,” Maly says.
The biggest and most significant way in which the company has changed to remain cost-competitive is through automation. Although the push for greater automation has helped keep costs down through greater efficiency, Maly says the company took the plunge for a different reason at first.
“We were in a very bad situation in 2004, where we had very high worker’s comp claims, pushing half-a-million dollars, because we were doing things the old-fashioned way,” Maly says of the company’s decision.
With labor and worker’s comp costs spiraling out of control, Toyoda Gosei Fluid Systems’ engineers turned to an outside source to help automate the company’s operations as much as possible. Within six months of starting the automation campaign, the company had installed nearly a dozen machines, and today the company has 65 machines for tube forming, accounting for 100 percent of the fabricating done by Toyoda Gosei Fluid Systems.
Trying New Things
The impact has been substantial, Maly says. Since taking the first steps toward greater automation, Toyoda Gosei Fluid Systems has seen its worker’s comp claims decreased from $500,000 to around $25,000 a year. The company accomplished all of this without causing a drop in quality, either. In fact, Maly says the company recently won Honda’s second-highest quality award for vendors.
“We’ve always been very curious, always wanted to not stay still and we’ve always wanted to try things,” Maly adds.
To ensure that the company remains on the cutting edge of technology, Toyoda Gosei Fluid Systems has several engineers with deep backgrounds in robotics. Additionally, the company participates in a co-op program with a local university to share engineering expertise. Engineers from the university rotate in and out of the company to provide their knowledge and help solve problems. This means the company always has an additional four co-op engineers on hand, Maly says.
The last few years have not been without their challenges for Toyoda Gosei Fluid Systems, however. Because the company’s products are made with highly engineered resins instead of off-the-shelf materials, it is very susceptible to price increases.
In the last few years alone, Maly says, the company has seen resin prices increase 30 to 45 percent. This cost makes up 10 percent of the company’s total costs, but it is working to eliminate this problem through constant innovation.
Maly says Toyoda Gosei Fluid Systems is in the process of testing new materials that are as effective but less expensive than the resins it currently uses. Maly says the company expects to have these new materials integrated into its operations within the next two to three years, which should offset any increases in the prices of traditional materials.
With these measures in place, Toyoda Gosei Fluid Systems expects quite a bit of growth, Maly says, with sales expected to reach nearly $80 million by 2015.
“It’s been slow going, but it’s happening,” Maly says.