Autoliv, a major player in automotive safety systems, has opened a new plant for airbag inflators in China, the companies ninth manufacturing facility in that nation, and its sixth inflator plant globally. The new facility, which is located in Shanghai, will meet the demand for airbag inflators, both from the rapidly growing Chinese market as well as other Asian markets, such as South Korea and Japan. Autoliv’s strategy is to have manufacturing and engineering resources close to its customers, and to have a substantial portion of its manufacturing base in low-labour-cost countries. Currently, the company has more than 40% of its employees in these countries. To date, Autoliv has manufactured only labour-intensive products such as seatbelts, steering wheels and airbags in low-labour-cost countries. However, recently Autoliv opened a plant in China for safety electronics, which, like airbag inflators, are relatively capital-intensive products. The new Chinese investments therefore represent an expansion in Autoliv’s use of low-cost country production. According to a company release, there are mainly two reasons for this adaptation in global strategy. Currently, Autoliv imports airbag inflators for the Asian markets from its facilities in the United States. This has been efficient as long as the volumes have been small. However, local production will eliminate import duties, (which has been a thorny issue between the North American, the E.U. and China for months) reduce shipment costs from the U.S. and enhance the possibilities to use just-in-time deliveries as is required today in most of the automotive industry. In addition, as a side effect, manufacturing space could be released in United States for other products. Secondly, in response to the inherent pricing pressure in the automotive industry, Autoliv is committed to increase its sourcing in low-cost countries. Before the end of this decade, the Company expects to source 50% of its purchasing value in these countries, compared to less than 15% in 2004, when this strategy was adopted. The new inflator plant in China could contribute to this strategy by finding and more importantly, training Chinese suppliers so they can meet the quality standards required of components in automotive safety products. Capital expenditures will total $50 million for the current expansion phase, which is expected to meet Autoliv’s capacity needs for airbag inflators for the next few years. The plant will then have more than 500 employees and raise Autoliv’s global production capacity for airbag inflators by 20% to close to 100 million annually. Most of the inflators manufactured in China will be used in Autoliv’s own airbags but 5-10% are expected to be sold to other airbag assembling companies. The customers for the Autoliv airbags will include Nissan, Mazda, Hyundai and General Motors as well as several Chinese vehicle manufacturers such as Brilliance and Chagan.