Sumitomo Electric Makes Aluminum Bet as Automakers Shed Weight

Source: Smitomo Electric Industries Ltd. via Bloomberg

An undated handout photograph shows Smitomo Electric Industries Ltd.'s aluminum electrical wiring developed in 2010 for Toyota Motor Corp.'s Ractis subcompact. Close

An undated handout photograph shows Smitomo Electric Industries Ltd.'s aluminum... Read More

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Source: Smitomo Electric Industries Ltd. via Bloomberg

An undated handout photograph shows Smitomo Electric Industries Ltd.'s aluminum electrical wiring developed in 2010 for Toyota Motor Corp.'s Ractis subcompact.

Sumitomo Electric Industries Ltd. (5802), the world’s second-largest maker of wire harnesses in cars, is preparing to start selling an aluminum-based product that may help the company vie for the lead in the market.

“We’re near the point where the quality is high enough and we can make final safety checks,” Senior Managing Director Mitsuo Nishida, who oversees Sumitomo’s auto-related business, said in an interview last week in Nagoya. The material is strong enough to be used in the engine area of a car and is lighter than the copper wiring commonly used, he said.

Sumitomo Electric is betting aluminum-based harnesses, which are cheaper than traditional copper-based products, will help the company challenge market leader Yazaki Corp. as automakers seek lighter parts. Aluminum may reduce the weight from wiring by about 20 percent, helping carmakers produce lighter, more fuel-efficient vehicles, Nishida, 64, said.

“This is a technological breakthrough and the impact should be big,” Takeshi Miyao, an analyst at consulting company Carnorama in Tokyo, said by telephone. “Carmakers are eager to reduce a car’s weight even by a single gram.”

While Osaka-based Sumitomo Electric has offered aluminum wiring in the past, such as in 2010 with Toyota Motor Corp. (7203)’s Ractis subcompact, the products could only be used in limited areas of the vehicle because they weren’t resistant enough to heat and vibration, Nishida said. The new products could be used throughout a vehicle, he said.

Revenue from electrical wiring, Sumitomo’s main product, was 740.1 billion yen ($9.4 billion), or 26 percent of the global wire harness market during the year ended March 2012, the company said in May. Sumitomo’s customers include Toyota, Honda Motor Co. (7267), Nissan Motor Co. (7201) and Volkswagen AG. (VOW)

‘Good Position’

Furukawa Electric Co. (5801), a Japanese maker of optical fiber and other cables, applied a “tentative version” of aluminum wiring to Toyota’s Land Cruiser SUV this year, Kenichi Nakano, a company spokesman, said by telephone. Furukawa continues to develop stronger aluminum wiring by combining the metal with carbon fiber and plans to propose sales to carmakers by 2014, said Nakano.

Sumitomo Electric, up 1.6 percent this year compared with a 10 percent decline for the 24-member Topix Nonferrous Metal Index, fell 2.4 percent yesterday to 851 yen on the Tokyo Stock Exchange. The Nikkei Stock Average fell 1.1 percent.

On the global investigation into price-fixing in the auto- parts industry, Nishida declined to comment beyond saying that Sumitomo electric is still awaiting for U.S. and European investigators to report their findings.

Yazaki in January agreed to pay $470 million, the second- largest criminal fine for a violation of the Sherman Act antitrust law, and four of its executives agreed to serve prison sentences for their roles in a price-fixing and bid-rigging conspiracy, the U.S. Justice Department said in January. In November, Furukawa pleaded guilty and was sentenced last year to pay a $200 million fine.

To contact the reporter on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Drew Gibson in Osaka at dgibson2@bloomberg.net.

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