Plastic Packaging Products From China

TORONTO (July 27, 2010) — China’s Yapp Automotive Parts Co. Ltd. and Canadian auto supplier ABC Group have created an alliance to provide plastic fuel tanks in Asia, North America and Europe.

The alliance does not involve any financial costs, but it should allow both firms more opportunities to bid on global projects just as automakers are creating more global vehicle platforms.

“Our combined footprint will satisfy the [carmakers],” said Robert Kunihiro, co-managing partner for Toronto-based ABC in a July 22 telephone interview. “We can be a one-stop shop, almost the equivalent of one company for design, engineering and manufacturing. This allows us to stand toe-to-toe with the big companies.”

ABC blow molds more than 1 million multi-layer fuel tanks annually for both auto and non-auto customers in North America. The company’s operations also include blow molding of exterior and functional parts, injection molding, thermoforming, rotational molding and polyurethane foam production. ABC also has its own in-house compounding and mold making units.

Yapp, based in Yangzhou, China, is the largest tank manufacturer in China, with eight tank molding facilities.

ITB Group Ltd., a Novi, Mich.-based consulting company that tracks the global fuel system business, estimates that 60 percent of the fuel tanks made in China are plastic, with Yapp producing 30 percent of the market.

Yapp also has one each in India, Australia and Russia and said it is building a new site in the Czech Republic. It briefly considered an alliance with tank maker Inergy Automotive Systems in 2005 that would have had Inergy buying a controlling stake in the company, but eventually decided to remain solo and pursue its own growth.

Now the alliance with ABC will provide it with another avenue for expansion.

Yapp, in a statement, said the alliance will help both companies “take full advantage of each other’s resources” and give them a worldwide production platform to accept global plastic fuel tank projects.

Yapp said the two firms will work together in both the development and manufacturing, and noted that the two firms have research and development centers in China and North America, respectively. It said the alliance will rank among the top three global suppliers of plastic fuel tanks.

ABC is one of the smallest fuel tank makers in North America, but the alliance with Yapp will give it far more opportunities than it would have had independently, said Joel Kopinsky, managing director for ITB Group.

“They’ve really been at a big disadvantage for several years, but this would give them more opportunities,” he said.

Carmakers are increasingly looking to create a car or truck that is built the same way in every market, rather than creating different versions of the same car in individual regions. They also want to work with a group of suppliers that can produce the same parts in multiple regions.

There are three major global plastic fuel tank makers now — Inergy, TI Automotive Ltd. and Kautex Textron GmbH. The Yapp and ABC alliance will give the two companies the ability to compete with those firms, with joint engineering and development and molding by ABC in North America and Yapp in Asia and Europe, Kunihiro said.

The Yapp and ABC alliance still will face an uphill battle against the big three tank makers, Kopinsky said. Europe is the biggest plastic fuel tank market, and TI, Inergy and Kautex all have extensive operations there. Even with Yapp’s new facilities, the two companies will be limited.

“It’s an interesting alliance,” he said. “It gives each of them a lot more opportunities by being together, but even together they’re still weak in Europe and weak globally.”

Alliances like the ABC and Yapp venture make sense for suppliers that want to compete on a global scale, but do it affordably, said Jim Gillette, director of supplier analysis with IHS Global Insight, an industry analyst based in Lexington, Mass.

“If you have two firms who are able to share their expertise without the huge investments in capital needed to set up operations in both locations, it makes sense,” he said.

Steve Toloken, Plastics News’ Asia bureau chief in Guangzhou, China, contributed to this report.

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