Orga Card Systems Inc., the German smart card company, has announced a joint venture with Kirk Plastic Co., the second-largest manufacturer of financial transaction cards in the United States.
Kirk will give Orga a manufacturing outlet for its chip card technology at a time when several other European companies are jockeying for position in the potentially lucrative U.S. market.
Initially, Orga plans to ship unfinished cards from the United States to facilities in Germany, where chips will be embedded and cardholder information encoded.
Future plans call for full production at the Kirk facilities in Los Angeles. Both companies will distribute the cards.
Terms of the deal, which is expected to be consummated within three months, have not been disclosed.
The pact illustrates Orga's eagerness to compete as the U.S. moves from the magnetic-stripe standard - Kirk's and its domestic competitors' specialty - toward the advanced card technology. "We want a foothold here in the States," said Holger Mackenthun, president of Orga USA, which is based in Paoli, Pa.
Orga will provide smart cards for MasterCard International's 1995 smart card pilot in Canberra, Australia. Mr. Mackenthun said Orga would like to participate in Visa U.S.A.'s 1996 Olympic pilot as well, although competitor Schlumberger of France has been chosen to produce First Union Corp.'s cards.
NationsBank Corp. and Wachovia Corp., also participating in Visa's test, have not announced their smart card suppliers.
Orga, which is solely dedicated to smart cards, produced about 50 million last year, said Mr. Mackenthun. The company, owned by three German corporations, expects 1995 revenues of $85 million, up from $60 million in 1994 and only $10 million in 1991.
The joint venture with Kirk follows other U.S. gambits by Orga's biggest rivals.
In May, Gemplus Group of France, the leader in total chip cards produced, said it was taking over DataCard Corp.'s manufacturing operations as part of a strategic alliance. At the end of last year, Schlumberger purchased Malco Plastics, the No. 1 payment card producer in the United States.
The Bull Group of France was the first to open a manufacturing facility on American soil in the 1980s. Recently Solaic, yet another French concern, and Giesecke & Devrient, a German company, opened U.S. offices.
"The Schlumberger-Malco deal was a big gamble," said Kirk Hyde, president of Kirk Plastic. Schlumberger "purchased the company and paid a lot, while Orga and Kirk are forming a strategic alliance, with less risk for both parties."
He said the companies don't have to buy equipment or enter each other's businesses. "We're using each other to develop the market," not only for the United States, but Asia, South America, and other emerging markets. But he added, "I'm not betting the farm."
The companies will increase their investments over time, as the market develops, Mr. Hyde said.
Orga's owners - Preussag, a steelmaking conglomerate; Bundesdruckerei, the German federal printing company equivalent to the U.S. Mint; and Detecon, a consultancy owned by Deutsche Telekom, Deutsche Bank, and Dresdner Bank - have "deep pockets" to invest in new technology and equipment, said Mr. Hyde.
Kirk Plastic produced more than 120 million magnetic-stripe cards last year and had $22 million of revenues.
The Orga deal is "one more indication that there's a lot happening in the U.S. marketplace," said Joseph Schuler, a Minneapolis-based smart card consultant.
While Mr. Schuler expects more partnerships, the industry is tightly knit. "To companies not yet in an alliance, he said, "You'd better get hustling or there may be none left to pick."
