Keeping it cool in Arkansas.

"Every day we wrack our brains on how to achieve the price demands of our customers," says Denso president and CEO Koichi Fukaya. It is, he says, a "perpetual activity," especially since the pressure to reduce costs, "is coming from every automaker," and shows no signs of abating. However, he doesn't see this pressure in purely black and white financial terms because cost is only one measure of success. "Many within the industry have misunderstood the call for cost reduction as an end in itself," says Fukaya. "You can have the lowest cost system, but it has no value to the OEM or consumer if its level of quality and function isn't competitive."

One way Denso hopes to provide value--and keep costs low--is by locating assembly plants near its customers. The latest is under construction in Osceola, Arkansas. Little more than a cleared section of a cotton field today, the 217,000-[ft.sup.2] assembly facility will come online in 2004 and its 500 non-union employees will build 70,000 radiators for heavy equipment, and 1.5 million automotive HVAC units each year when full production is reached sometime in 2008. Technical support for the radiator production will be provided by Denso's UK radiator unit, while employees from its Battle Creek, MI, HVAC plant will help get that part of the operation online by January of 2005.

Jerry McGuire, president of Denso Manufacturing Arkansas (DMAR), comes from the Battle Creek facility, which initially will provide most of the components for the climate control units produced at DMAR. "Over time we'll look for a potential supply base near Osceola," says McGuire, "but we will start by assembling the HVAC systems from components sourced from Battle Creek." McGuire says this will give workers the opportunity to become proficient in their new skills--a training center is part of the new facility--as they work to meet growing North American demand. "Both the Battle Creek and Osceola facilities will have enough work to keep them very busy," he says.

One HVAC system that won't be seen at either facility in the near future is Denso's prototype design that replaces the current R134a refrigerant with C[O.sub.2]. "We are aggressively investigating refrigerants that are gentle to the environment," says Satoshi Watanabe, managing director of Denso's Thermal Systems Group. But switching to C[O.sub.2] would require climate control systems to run at much higher pressures and use unique sealing systems. "We need to develop the technology to overcome these hurdles," says Watanabe, "but it will take a global consensus from regulators, OEMs, and technical groups like SAE to move this technology forward." Without it, he suggests, the impetus to use C[O.sub.2] as a refrigerant will languish.--CAS