Canadian auto parts supplier Tesma International reportedly said on Wednesday it would build an incubator plant in China next year that will start shipping parts by 2006.
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According to Reuters, Tesma, which makes engine, transmission and fuel system components, said it had identified a location for the facility, which should be in full production in 2008 or 2009 but it did not provide specific details on cost, volumes or location.
Incubator plants, small facilities capable of making more than one product, enable companies to make cautious forays into new areas without the costs of larger, dedicated plants, the report noted.
“It is intended that spin-offs into independent divisions will occur as we continue to develop critical mass in various product areas,” Tesma chief financial officer Anthony Dobranowski told Reuters which noted that the firm, one of the Magna International group of companies, already has a plant in South Korea.
Dobranowski reportedly said capital spending on the project would range between $10 million and $12 million each year over the next three years. The facility is expected to be running by the second quarter of 2005 “at the latest” he said.
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By GlobalDataAnalyst MacMurray Whale at National Bank Financial told Reuters the time was ripe for such a venture.
“Chinese industrial capabilities have gotten so good that it’s a question of time before they figure it out and do it themselves,” he reportedly said. “So I think it’s probably the right time for these Canadian suppliers to go over there and start getting some capacity on the ground.”
