Koch to Build Plant in China

Once the Chinese bureaucracy approves, Koch Enterprises will build an auto parts plant northeast of Beijing. The plant, which will be located in Dalian, a city of six million people, will make aluminum die castings that will go in air conditioning compressors for cars built and sold in China. Hyundai, a Korean auto manufacturer, will be the main customer. "It's a big growing market," said Koch Enterprises President and CEO Bob Koch. "Waiting time in China for a new Hyundai is two months."

Koch Enterprises, founded in 1873 by Bob Koch's great grandfather, employs about 3,000 people around the world. About two-thirds of them work in Evansville and Henderson, he said. Before Sept. 11, 2001, Koch had about 3,400 employees. At the low point of the recession, the worldwide tally dropped to 2,700. While it closed one plant in Mexico, most of the losses have come from the U.S. facilities, Koch said.

The Chinese plant will open with about 150 employees, and should take about nine months to build. Koch declined to reveal how much the company is investing in the project.

"We've been growing in the foreign countries," he said. That's because Koch's customers, like Delphi, General Motors' main auto parts supplier, have been expanding outside the country. "They've been asking us to follow them," he said. Koch has a plant in Harlingen, Texas to serve Delphi's plant in Matamoros, Mexico 25 miles away; it also has a plant in Brazil to serve Delphi's plants in Brazil. It has plants in England, Canada and Korea, which have labor costs nearly equal to the United States. It also has a plant in Hungary, which produces parts at the lowest cost.

In Brazil, "the wages are lower (than in Hungary) but the productivity is not as good," Koch said. Except for the Brazilian plant, each foreign factory is led by an American employee who spends at least part of the time at a U.S. plant. For instance, the Korean and Hungary plants both have presidents who live in Henderson, Ky., and work some of the time at Gibbs Die Casting, the Koch company in Henderson.

The Chinese plant will not compete with the work done in Henderson, where workers also make aluminum die castings for air conditioning compressors, Koch said. All those parts go into cars made for the North American market, he said. Some go to Delphi, to Visteon, Ford's main parts supplier or to Chrysler suppliers; others go to intermediaries that sell air conditioners for Toyota, Honda and Mitsubishi factories in the United States and Canada.