Autoliv yesterday opened its fifth global plant for safety electronics and its eighth manufacturing facility in China.

The new facility, which is located in Shanghai, will primarily produce airbag control units, both for the growing Chinese market and for other Asian markets such as South Korea and Japan. The plant could also act as a sub-contractor to other Autoliv plants in high-cost countries.

Autoliv says its strategy is to have manufacturing and engineering resources close to its customers, and to have a substantial portion of its manufacturing base in low labor-cost countries.

Currently, the company has more than 40% of its employees in these countries. So far, Autoliv has only used low-cost countries as a means to reduce costs for its non-electronics products, which typically are more labor intensive to produce than electronics.

The new Chinese investment therefore represents an expansion in Autoliv's use of low-cost country production.

The Chinese electronics plant will have 300 employees and the capacity to increase Autoliv's annual sales of electronic control units for airbag systems by nearly 20%. Of the employees, 40 will work in a newly founded application engineering department and support the rapidly growing Chinese auto industry. The capital expenditure will amount to US$20 million for the first expansion phase, which is expected to meet Autoliv's growth needs in airbag control units for the next three to five years.

The building is already prepared for the next expansion phase, which would double the surface area and number of employees. Annual sales from the plant would then increase to a quarter of a billion dollars, from approximately $100 million after the initial phase.