At a press conference at ConExpo, Terex president Ron DeFeo made clear why he thinks this sort of expansion is so important to big crane companies: “If you can not deliver products to customers when they want, other people will enter your market: and we’re seeing that already, with the Chinese manufacturers in developing markets. The way to tackle this is to expand production in these markets.”
Terex describes its current business target as ‘12 by 12 in 10’; that is, operating margins of 12% on revenues of $12bn by 2010. At the Terex press conference, DeFeo said that Terex had met its last landmark target, of $6bn revenues by 2006, without making acquisitions. “12 by 12,” he said, “will be achieved with only a few acquisitions.”
DeFeo noted that Terex lacks manufacturing facilities in Asia. It has beaten Manitowoc to establishing a mobile crane production facility, Terex Changjiang, which has been operating under Terex management since early 2006, but its entry into Chinese production is far more recent than Manitowoc Potain’s. “China,” DeFeo said, “is an important market, but a difficult one. Terex Changjiang can compete with any brand in China.”
At the end of 2007, Terex increased its stake in Indian backhoe, steer loader and compaction roller manufacturer Vectra to 70%; the business is now known as Terex Vectra and operating under Terex’s global branding. President and chief operating officer Tom Riordan explained that Terex would be using the Vectra business as a launchpad for building Terex’s presence in India, across its product range.
Riordan described this as a ‘campus’ approach. Rather than developing its different product arms separately, the construction equipment conglomerate is building a materials processing plant on a new site in Bangalore, which will be followed by a crane plant on the same site, and then one more facility producing another type of equipment.
Talking to Cranes Today after the press conference, Steve Filipov, newly promoted to president, developing markets and strategic accounts, discussed the idea in more detail. Terex’s strategy, Filipov said, isn’t just to make use of existing production facilities, but also the distribution networks of new acquisitions and joint ventures. Vectra’s distribution network will be used as a base, from which Terex can build sales and servicing networks for its other products, including cranes.
Terex, Filipov said, is looking at Brazil and Russia in the context of the firm’s global expansion, but it has no firm plans. Other markets under consideration for investment, DeFeo said, include the Middle East and Africa.
Manitowoc used the show to announce that it had acquired a 50% stake in China’s fourth largest mobile crane manufacturer, Tai’an Dongyue (see p11). The deal will see experts from Manitowoc’s mobile crane centre of excellence in Shady Grove help establish mobile crane production facilities capable of building cranes to Manitowoc’s global standards. The deal is Manitowoc’s second major acquisition in China, following Potain’s 1995 investment in (and subsequent acquisition of) a tower crane manufacturer in Zhangjiagang.
Manitowoc Crane Group president Eric Etchart oversaw the development of the Potain business in China, in his previous role as vice president for Asia, a position he first took on before Potain’s acquisition by the American group. He told Cranes Today, “I believe the competition is too late in China. It’s a pain for gain thing: after 20 years we have a better idea of how to do business in China. We’re a lot more mature than our competitors in knowing how to work in China. If we can replicate the model we’ve followed with our Potain plants in the Tai’an mobile plant, it will be very successful.”
As well as the Zhangjiagang plant, Manitowoc has established Potain production facilities in Portugal (serving Europe and South America), India and Slovakia. The company’s strategy has been to move as fast as possible when it opens a new plant. Etchart says that the company’s recent acquisition of Indian licensee Shirke is a good example of this approach.
“When we bought Shirke,” Etchart said, “It was consistent with our strategy of focussing on high growth markets. The problem is to be very quick: you need the best supplier base, the best distribution network, and the clients. From a greenfield site, it can take two or three years to open a crane factory. India is moving very fast, as Shirke had already built a new plant while they were a Potain licensee. It was a no-brainer to buy a licensee who had a factory running, and knew our product.”
The company aims to rapidly bring its acquisitions up to the same standard as its centres of excellence (Shady Grove in the US, for mobiles, and Moulin, in France, for tower cranes). Etchart said, “We now have common processes and components in all of our plants around the world: you can’t see the difference between Potain products made in France and in our plants around the rest of the world.”
Potain India’s new president TR Badarinarayan explained how this system works at a regional level, “The idea is to be as close to the market as possible. Manufacturing in Pune has been streamlined and brought to global quality and safety standards. The cranes made in India are in line with the standards of those made in France. We’re making selected models that meet the needs of the regional market. The decision-makers for India are based in India: they need to know what the market needs. I’m responsible for sales, marketing and manufacturing for India.
“It’s important to have components of an acceptable quality. Suppliers are compared to the standards set in France: where local suppliers can meet these standards, we can use them, or we can use supplies from our global suppliers.”
Manitowoc now has tower crane plants in, or close to, three of the four biggest emerging markets, with India and China having their own factories, and Russia served by the recently acquired plant in Slovakia. With three of the four so-called BRIC countries served by local plants, the next step would seem to be a South American plant to serve Brazil.
Cranes Today asked Etchart about the likelihood of an acquisition there. Etchart said, “We’re currently supplying South America from our plants in Portugal and China, because they are producing the product lines that the region needs, but we are looking at replicating the same model of development there. We’re very bullish about acquiring in emerging markets, but the Tai’an deal is going to take a lot of resources. We can’t have too many of these projects at once.”
