TYCHY, Poland - Isuzu Motors Ltd. wants to be the world's biggest diesel engine supplier. It is aiming for annual sales of more than 1.8 million units by 2005.
The growth will be fueled by a dramatic increase in demand in Europe. Isuzu forecasts that Europeans in 2005 will buy almost 8 million diesel engines. That is 2.3 million more than they bought in 1996.
During the grand opening of an engine plant here, Isuzu Chairman Kazuhira Seki said the company will reach its sales goal by supplying more engines to General Motors and winning new non-GM business in the growing European diesel market.
By 2005, Seki expects Isuzu's annual diesel engine sales in Europe, mainly for small cars, to reach 600,000 units. Currently Isuzu ships about 130,000 diesel engines a year from Japan to a single customer in Europe, GM's Adam Opel AG unit.
Opel, at least for the next few years, will remain Isuzu's primary target in Europe. The new Tychy plant initially will supply about 200,000 units to Opel a year, mainly for the Astra.
But to reach 600,000 units in Europe, Isuzu will have to add customers. And that won't be easy in a market dominated by PSA/Peugeot-Citroen and Volkswagen AG. Isuzu is currently No. 3 in the world.
Two years ago GM put Isuzu in charge of all of GM's future diesel engine programs. GM owns 49 percent of Isuzu.
The choice was based on Isuzu's experience with diesels dating back to 1936. Isuzu manufactures a wide range of diesel engines for passenger cars, medium- and heavy-duty trucks, and other industry applications. Last year, it produced about 515,000 diesel engines worldwide, down from 703,000 in 1997. Isuzu blamed the downturn on depressed markets in Japan and southeast Asia.
Isuzu has supplied diesel engines to Opel since 1987 from its plant in Hokkaido, Japan.
In two years Isuzu has built two plants to supply GM, one in Tychy and the other in Moraine, Ohio.
The Tychy plant produces a 1.7-liter engine that uses common-rail direct fuel injection. When the Moraine plant opens next year, it will produce a 6.6-liter V-8 engine for GM's full-sized trucks and sport-utilities.
Moraine, a 60-40 joint venture between Isuzu and GM, will have the capacity to build 200,000 engines a year by 2004. Those larger engines also use a common-rail fuel injection system.
Isuzu will need more capacity in Europe as its develops other diesel engines for Opel.
Although Seki would not reveal the company's plans, Isuzu likely will develop a 2.0-liter diesel engine to replace eventually the Opel 2.0-liter introduced two years ago and made in Kaiserslautern, Germany. Isuzu and GM also anticipate the need for a passenger car engine smaller than 1.7-liters.
Opel produces nearly 200,000 diesel engines - 2.0-liter and 2.2-liter - a year in Kaiserslautern. Arvin Mueller, vice president of the GM Powertrain Group, said GM's arrangement with Isuzu won't necessarily push Opel out of that business.
'Certainly any new diesel engine design that we undertake will be done by Isuzu, but with a lot of involvement by General Motors,' Mueller said. 'It can take many forms as far as manufacturing.'
But there's more to Europe than just Opel, and Seki acknowledged Isuzu in Europe is bidding for diesel engine work outside of GM.
Isuzu wants to be a player in the world's fastest growing diesel engine market. Tychy will serve as its launching pad. The plant has the capacity to make another 100,000 engines for other automakers, and Isuzu has enough land at the site to double the size of the operation if needed.
Isuzu also is putting the final touches on a new diesel engine development facility near Russelsheim, Germany. Once completed, it will have 37 test beds and be able to handle a full range of passenger car diesel engines, from 1.2-liters to 3.0-liters.
Although the Isuzu facility is only 8km from Opel's technical center and manufacturing complex in Russelsheim, there are no Opel engineers stationed in the new building.
Said Roland Nipp, chief engineer at the facility: 'Opel is not the only client of Isuzu. So we have to take care of confidentiality.'