Manufacturing News

German plastics companies wary of venturing into China

We took a close look at China but found that we had come too late in that country. There were already too many plastics manufacturers in that country

Although China continues to be the buzzword in the global plastics industry, German companies in the industry have not been aroused to shift production to the country as many of their counterparts in the US and Western Europe have been doing, despite its many advantages including the allure of low-cost production and labor.

"We took a close look at China but found that we had come too late in that country. There were already too many plastics manufacturers in that country," said Dr Werner Feistkorn, Chairman of Rheinische Kunststoffwerke (RKW) AG, one of the leading film manufacturers in Europe, who explained why China did not appear very attractive for his company, in an interview with us. "Instead, we found Vietnam offer better opportunities... Although per capital plastics consumption [in Asia] is still low, I am upbeat not only about our products but also, in general, for the plastics industry."

Dr Werner Feistkorn, Chairman of RKW, one of the leading film manufacturers in Europe

RKW has set up a polyethylene film manufacturing plant in Saigon, Vietnam, which supplies mainly upper-value products for the export markets and sells low-end products in the domestic market.

Like RKW, Weber Kunststofftechnik (WKT), which manufactures plastics-based automotive interior components for such heavyweights in automobile manufacturing as Volkswagen, Audi, SEAT and ?koda, is also wary about shifting operations to China. The company's Managing Director Thomas Zipp said that his company had decided, instead, to set up an operation in Poland which is "geographically and culturally much closer to Germany than Asia". At present, the Polish unit provides 90% of its supplies to Germany.

Dr Thomas Zipp, Managing Director of Weber Kunststofftechnik, a leading producer of plastics-based automotive components

"We were not, particularly, enthusiastic about China. We studied the outsourcing possibilities in China but were not enthused because of problems such as the geographic distance, alien culture, and work ethics," Dr Zipp explained.

Dr Anja Schulz, a lecturer at the University of Dortmund who did an empirical case study about the internationalization strategy of German companies, said small-sized companies, in particular, are at a disadvantage because they lack the resources for a sustained operation abroad.

R&D plays important role

The German Institute for Plastics Processing believes that to keep pace with the vicissitudes discernible in the global plastics industry, Germany should pay greater attention to research and development. "We need in Germany, and also in Europe, an open climate for innovations and the acceptance that such a climate is necessary in order to surmount the challenges of our times," admonished Prof. Walter Michaeli, President of the institute.

He also highlighted the importance of organizing in networks extending beyond the frontiers of the country, citing examples of current initiatives of some leading institutes to set up an excellence cluster of "integrated production for high-wage countries".

One point to note is that there is also widespread concern that the exorbitant costs of product and labor in the country - Germany has the highest labor and production costs in Europe - would, eventually, lead companies to scout for locales in distant countries, particular China. Despite the problems of geographic distance and a totally different work culture, they could still become one day an attractive proposition for cost-conscious companies.

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