21.03.2012

Terex finds partner for Chinese crane business

Terex has announced that it has agreed a partnership deal with China Sinomach Heavy Industry Corporation which could substantially reduce its holding in its troubled Chinese joint venture truck crane manufacturing business - Sichuan Changjiang Engineering Crane Company.

A signing ceremony was held by Terex, Sinomach and partner Luzhou Shenli, to formalise the agreement earlier today – March 21st. No details have been given on the precise impact this deal has on the specific holdings of the two original partners.

The business, which will now be controlled by Sinomach, will continue to have access to the Terex overseas distribution and support channels as well as its engineering capabilities in order to improve its global competitiveness.

As part of the agreement Sinomach has invested in Sichuan Changjiang and will own over 50 percent of the business going forward. The possibility of Terex reducing its exposure to the business was first mooted by chief executive Ron Defeo in July last year Click here to see that report so it is not a total surprise.

A statement from Terex said: “As a strategic partner to Terex, Sinomach will help accelerate both domestic and overseas market development through existing relationships, as well as extensive international projects and wide domestic sales channels.”

Sinomach Heavy Industry is a wholly-owned subsidiary of China National Machinery Industry Corporation and specialises in restructuring and integrating engineering machinery businesses under the China National Machinery Industry Corporation owns 28 companies, including one publicly listed company and four international companies. It also has joint-venture companies with Hyundai and Komatsu among others.

Vertikal Comment

Terex acquired its 50 percent stake in Sichuan Changjiang Engineering back in April 2006 and anticipated that it would take up to five years to bring the business to a point where exports would begin to make a significant impact on the business. However in the past 12 months or so it has openly discussed that it was struggling with the business, in spite of introducing some significantly improved products.

It also expected the rules that currently limit foreign ownership of road-going crane companies to 50 percent to have changed by now, allowing it to acquire more of the business. There is currently no sign of that happening. So this move – bringing in a large and experienced local partner, while keeping its hand in makes eminent sense.