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Sany to open US factory

(China Daily)
Updated: 2006-10-13 08:58

Chinese heavy machinery firm Sany said it will build an assembly plant in the United States, in a move that will make it the first Chinese machinery company to open a factory in the country.

"We will initially invest around US$9 million in the US plant, with this figure rising to US$50 million three years later," said Xiang Wenbo, Sany's executive president.

Xiang and other Sany senior executives visited the United States last month to select a site for the plant. A final decision on its location is expected by the end of this year, he said.

Money will not be a major problem for the privately owned company, said Xiang, adding that Sany will raise funds via its Shanghai-listed unit in the near future.

Analysts said that the move will greatly assist the company in its efforts to gain a foothold in the global market and will raise its competence to a new level.

Based in Central China's Hunan Province, Sany is a major firm in China's construction machinery industry. But exports account for less than 20 per cent of Sany's sales revenue, most of which are to developing countries.

"Having an assembly plant will largely increase Sany's overseas presence, especially in the North American market," said Guo Yaling, an analyst with CITIC Securities.

With the rapid development of China's construction industry, more and more foreign companies are getting involved in the sector.

Swedish trucks and engineering giant Volvo said last month its construction equipment division agreed to buy 70 per cent of Shandong Lingong Construction Machinery Co, one of China's major construction machinery manufacturers.

And US private equity firm Carlyle Group agreed to buy 85 per cent of Xugong Group Construction Machinery Co Ltd last October for US$375 million.

The Xugong deal would be the biggest-ever acquisition by a foreign investor of a controlling stake in a leading State-owned company in China. However, the deal awaits the central government's approval.

Sany said in June that it aimed to pay 30 per cent more than the Carlyle Group in order to acquire Xugong, its larger rival.

The price that the Carlyle Group agreed to pay for the purchase was undervalued. Sany could pay 30 per cent more or even higher, Xiang said.

"And it is not good for China's machinery industry to sell a big and important company like Xugong to a foreign company. We have been planning to buy Xugong for a long time," he said.

(China Daily 10/13/2006 page11)