When Honda Cars Philippines, Inc. (HCPI) announced that they were closing the factory due to "market forces", many were shocked. The decision to shutter the Santa Rosa factory after nearly 28 years was not a light one, and what followed were protests and negotiations between the 387 employees (associates, in Honda speak) of the plant on what they will receive as recompense, especially since the closure is almost immediate.
Here's the thing though: there's a bigger network that's going to be affected, and its the supply chain for parts to support the factory's operations. We wanted to find out just how bad the follow on effects of the closure will be to the bigger parts industry in the country.
To find out, we reached out to Ferdi Raquelsantos of the Philippine Parts Maker Association (PPMA). The organization, as the name clearly suggests, is made up of many parts manufacturers and suppliers in the Philippines, and many of the association's members are contracted by Honda for their now-defunct assembly operations in Laguna.
According to Raquelsantos, the PPMA estimates that closure of the HCPI assembly plant will immediately cost the parts industry about PhP 240,000,000 (about USD 4.7 million) in lost revenue. He says that the number is just a rough, conservative estimate that covers about 3 to 6 months worth of parts supplied to HCPI by Philippine companies.
"They [our members] were doing daily deliveries, then suddenly no deliveries," said the PPMA executive. "All of a sudden, their items are stalled. All of these will go dead stock; whether its finished goods, raw materials, all of these are going to be useless."
"Initially we got shocked. Not only are there existing parts suppliers, there were also new parts to be supplied for the BR-V model.” said Raquelsantos when he recounted the moment he got the news. “We're right now doing product development. We spent time, money, and resoures for the last six months doing the product development to find out 'na wala na pala' [that it won't push through]."
Parts suppliers depend on the production forecasts from automobile companies, ordering smaller parts, raw materials, and other items from their own suppliers in order to meet the contract with Honda. A lot of these materials are already in the warehouses of the suppliers. Raquelsantos hopes there was enough time for Honda's parts suppliers to be able to cancel orders.
"Im sure Honda will pay for these anyway, but there are so many items we cannot quantify now. For example the molds used for plastic, dies for metal parts, assembly fixtures and jigs, all of those will just be useless."
We asked him if there were similarities with the 2012 closure of the Ford automobile factory (which is fairly close to the Honda plant in Laguna), but he says it was very different.
"When Ford left, everything was in schedules. They defined the cut-off point, so suppliers can adjust to that. So when they left, it was a very good transition. We were prepared, even with manpower, to shuffle everyone around,"said Raquelsantos. "This time, with Honda, boom... right away. So what do we do?"
PPMA, as an organization, wants to make locally-assembled and manufactured cars more competitive, particularly by increasing or adding tariffs on complete built-up units (CBU) imported from other countries.
There are about 1,200 employees nationwide (including Tier 2 and 3 suppliers) that will be affected by the plant closure.
Below is the list of all the companies that were supplying HCPI according to the PPMA's directory.
PPMA Members supplying HCPI:
AGC Automotive Phils., Inc. (Auto Glass)
AutoCarpets, Inc. (Vehicle Carpets)
B4 Manufacturing Corporation (Sunvisors, Trims)
BOPI Manufacturing Corporation (Flaps, Rubber)
C.N.R.G. Incorporated (Paint)
Denso Philippines Corporation (Airconditioning systems)
Enkei Philippines (Alloy Wheels)
F-Tech Philippines (Brake and clutch pedals)
Form Asia, Incorporated (Carpets, trims)
KEA Philippines (Not specified)
Laguna Autoparts Mfg., Corp. (Not specified)
Mitsuba Philippines Corporation (Horns)
Nippon Paint (Paint)
Paintplas Corporation (Plastic moulds)
Roberts Automotive & Ind. Parts Mfg. Corp. (Radiator, metal parts)
Sanden International Philippines, Inc. (Airconditioning systems)
Sanoh-Fulton Phils. Inc. (Metal parts)
Technol Eight (Not specified)
Titan Rubber Industries Mfg., Inc. (Rubber parts)
Toyota Boshuko Phils. Corp (Not specified)
Tri-R Allied Industries, Inc. (Metal parts)
Yazaki-Torres Manufacturing, Inc. (Wiring harness)
Non-PPMA Members supplying HCPI
3M Philippines, Inc. (Decals, stickers)
Autubus Industries, Inc. (Exhaust)
Furukawa (Not specified)
Grove (Not specified)
Honda Trading (Various parts)
IWSP (Wiring harness)
JR Penano Industries (Insulator)
JT Pencorp Inc. (Various parts)
Karzai Corporation (Various parts)
Kyoei Kogyo Phils., Inc. (Chassis, metal brackets)
Laguna Metts (Not specified)
Moriroku Philippines, Inc. (Plastic moulds)
New Rockford Manufacturing Corp. (Metal parts)
Nissin Brake (Brakes)
Philippine Allied Enterprises Corp. (Bridgestone tires)
Phil Iino (Not specified)
Phil Parkerizing (Not specified)
PISCC (Not specified)
Satosan (Not specified)
SCT (Not specified)
SD Trading (Not specified)
Tsuchiya Kogyo Phils., Inc. (Stickers)
Yutaka Phils. (Not specified)
Unioil Petroleum Phils., Inc. (Not specified)