Futuris expanding rapidly in its Thai base

IT is the stuff corporate dreams are made of. Build a factory in 2011, run out of space, build a second factory next door and then win enough contracts to force the construction of a third plant by the end of 2014.

That’s the story of Futuris, Australia’s largest automotive components supplier. Except that the strong growth the company is enjoying is not happening in Australia, it’s in the company’s Thai operations.

According to executive general manager of the Thai operations, David Chuter, business in the South East Asian nation is thriving, with a growing base of local workers.

“We opened this building in 2011, not that long ago, 18 months. The second building is already open and is filing quickly,” he said “We have about 830 employees, including 100 staff. Of those the majority are Thai. There are only three expats here, although there is a constant flow of people from Australia.”

Thailand is not the company’s first overseas factory since directors decided in 2005 the company had to go international to survive.

First, the automotive interiors and seating company went to China, building a plant right across the road from what was then a small producer named Chery.

It now has five other plants in China, servicing JAC, GAC GoNow and Brilliance, among others.

It also has a joint venture in South Africa servicing BMW and Mercedes-Benz and small in-factory operations with Tesla and Fisker in the US.

Futuris now has a total of 1800 employees around the world, with more than 800 in Thailand, about the same as in Australia.

Mr Chuter said Futuris first went to Thailand because it acquired a company that was supplying leather seat covers for Holden in Australia.

“That was a valuable learning experience because it taught us how to employ people in Thailand and all about labor relations,” he said.

It turns out that, after the Asian financial crisis, Thailand adopted Australian-style corporate governance and labor relations laws.

The rest of the story, he said, resembled the theme of the Kevin Costner film Field of Dreams: “build it and they will come”.

“Once we had representation here, established customers (in Australia) came knocking,” he said.

Relying heavily on its research and development base in Australia, Futuris was able to win contracts to provide seat frames and seat covers for the GM TrailBlazer, known as the Holden Colorado 7 in Australia, and for the Ford/Mazda joint venture (Auto Alliance Thailand) that builds the Ford Ranger and Mazda BT-50.

“A year ago, we had just over 200 employees, so we have added 600 employees in the last 12 months. That was largely June/July last year, when we had all the new product launches here.

“Production started for the Ranger/BT50 and production started for the Colorado and we brought all these people in,” Mr Chuter said.

The induction and training of the new employees has been a strain, but Mr Chuter says Futuris insists on a comprehensive induction.

“I try to meet every new employee that comes in here. Clearly I don’t speak Thai, so there is always a barrier, but I try to meet every employee face to face on their first day in the business so I can tell them what we think is important about working for Futuris.

“First and foremost it is about safety and well being. Secondly it is about having a strong team and third it is about the quality of what we do.”

Mr Chuter said safety was a high priority when operating in Asia because there is such a big difference in attitude to safety between Australia and many Asian countries.

“When you travel around Asia, it’s a different world in terms of the risk out there every day that people live in.

“You probably saw on the freeway 10 people on the back of a pick-up truck. So then, explaining to those 10 people when they walk in the factory doors that there is a different behavior and culture we expect is a challenge in itself.

“You have to be very clear that safety and well being are the absolute pinnacle of what we are trying to do here, because it also reinforces a culture of following rules and working as a team and identifying problems and identifying issues.

“That flows through into how the business operates as a whole,” Mr Chuter said.

The issue of people getting to work also prompted the company to offer transport from nearby residential areas.

Services like that and other working conditions virtually double the cost of each worker from the base daily wage of 300 baht or $A10 (that’s the new minimum wage introduced by the Thai Government in January), but Mr Chuter said it pays off in the long run.

He said it helped having long-established relationships back in Australia with GM and Ford when it came to winning new contracts in Thailand, although nothing was delivered on a plate.

For instance, Futuris initially won a contract for interiors for the Ford Focus, although it prefers to do the seats.

“Our entry strategy was to do interiors and then grow into seating. Now we have done that, we have secured contracts for future Ford models for seating.

“And we are very well in the mix with a number of Japanese customers and have been invited to quote.”

Just being invited to quote is a big deal with the Japanese car-makers because they generally take their “keiretsu” suppliers with them.

“We are down to the final stages of bid activity with some Japanese buyers, which is great news because the market here has always been dominated by the Japanese vehicle manufacturers and if you are going to be successful in Thailand, you need to find a way into supplying them as well.”“Apart from Toyota in Australia, we don’t supply any of these others so you’ve got to really “wow” them and give them a very, very healthy excuse as to why they can’t use one of their long time suppliers and break a long term relationship.

“We’re progressing well down that journey.”

Mr Chuter said it made sense to be in Thailand because, after China, Thailand was the most accessible and fastest-growing market.

“And it is the market where our biggest customers (GM and Ford) are making very significant investments.”

Mr Chuter said the Board of Investment wants more emphasis on design and development from the car and parts makers, and Futuris is well placed to meet that challenge.

“Again, it’s a good fit with the Futuris strategy as a whole.”

And he said Australian companies and executives need not fear being alone in Thailand, There are some Australian companies and many well-placed expats in the automotive industry.

“Next door is MHG, another Australian company which makes plastic painted parts. Two minutes down the road is Harringtons, which makes metal pressings for the industry.

“ARB has been here a long time.

“Wherever you go you find Australians. Trevor Negus, the manufacturing director at Ford Thailand, is ex Campbellfield. Sam Cassabini, the purchasing director here in Asia for Ford is ex Ford Australia.

“You can’t walk around this industry without seeing a lot of Australian capability here. I have to say you win business by being competitive, but having friends up here also helps.”