LAS VEGAS (Nov. 22, 2016) — Akebono Brake Corp. is boosting its brake pad manufacturing capacity in the U.S. to counter.. the fill-rate issues it encountered the past couple of years.
The record levels of new-vehicle sales in North America forced Akebono to shift much of its aftermarket production of friction parts to fill orders for its OEM customers.
Ironically, the surge in orders contributed to an ongoing operating loss. Akebono's Glasgow, Ky., plant racked up higher labor costs, as it ramped up production to 24/7, and expedited-shipment costs to fulfill OEM orders, the company said.
Tokyo-based parent, Akebono Brake Industry Co. Ltd., said in its annual report that "quickly returning its North American operations to stable profitability remains a top priority for Akebono management."
The company said it has revamped its local management structure, reviewed its product lines, and began working on reforms in its North American business, including changes to its production structure.
Last April, Akebono hired Wilm Uhlenbecker as president and CEO of Akebono Brake Corp. He previously was president of Mahle Behr USA Inc.
By early next year, the company expects to have new equipment up and running at its Glasgow plant to boost production by 25 percent, according to Ken Selinger, Akebono Brake Corp.'s director of aftermarket sales and marketing.
He told Tire Business that the manufacturing plant caught up on its OEM contracts mid-year and now, with the increased capacity, the company "can guarantee customers (affected by the aftermarket production shortfall), that's not going to happen again."
While OE accounts for a vast majority of its North American sales, Akebono wants to expand its aftermarket business. "That's why we're investing in capacity for the aftermarket side," he said.
Mr. Selinger claimed Akebono has a 54-percent market share in the OE passenger car/light truck friction business.
"The transfer of that technology to the aftermarket products is undiluted—that gives us a huge advantage over the competition," he continued.
Mr. Selinger said the company is forecasting a growth trend in premium and ultra-premium categories and it has been gaining customers in the Latin America and Caribbean markets.
"We've identified a lot of pent-up demand," he said. About three years ago, the company began aggressively signing up customers in Latin American markets who were seeking premium aftermarket friction products.
In both North America and Latin America "we're finding people are willing to spend more for an optimum solution," he said. "Problems lead to comebacks for WDs and professional technicians. If they want to do the perfect brake job and please the customer, Akebono provides that."
He said many customers are willing to pay more and spend more upfront for a longer lasting pad, claiming Akebono's brake pads provide the lowest cost per mile.
Meanwhile, the Akebono parent company said in its annual report that it is making strides to return its U.S. operations to profitability. North America accounts for 54 percent of its sales.
Akebono appointed new plant managers at its Glasgow and Elizabethtown, Ky., facilities; transferred some brake pad production to other manufacturing locations in Japan and Thailand; added new equipment for aluminum caliper production at its West Columbia, S.C., plant; and reduced shifts on most lines.
On Oct. 31, Akebono forecast U.S. division net sales will reach $1.36 billion for the fiscal year, ending March 31, with a lower operating loss of $29 million.
For the fiscal first half, ended Sept. 30, the U.S. operations reported $701 million in net sales, up 1.2 percent compared with the year-ago period, and an operating loss of $26 million, down from a $35-million-loss a year ago.
Akebono said efforts to prioritize order profitability, reduce production loads and improve productivity via transfer of some production, along with a significant reduction in expedited-shipping cost, will lead to smaller operating losses.
Besides the plants in Glasgow and Elizabethtown, Ky., Farmington Hills, Mich.-based Akebono Brake operates plants in Clarksville, Tenn., West Columbia, S.C., and Silao, Mexico.