CNH Global, Kobe Steel Ltd., and Kobelco Construction Machinery recently announced an agreement to form a global alliance for the marketing, development and production of crawler excavators worldwide. In addition, the alliance with Kobelco includes distribution of CNH construction equipment in Japan and the Asia Pacific region.
"This is an important strategic step that strengthens our position in the global construction equipment market," said Paolo Monferino, CNH president and CEO.
The alliance with Kobelco covers CNH brands outside of the Case network worldwide and the Link-Belt network in the Americas, which will continue to be supplied by Sumitomo Construction Machinery in line with the CNH multi-brand and multi-network strategy. The global alliance is subject to the required approval of the relevant regulatory authorities.
Structure of Alliance
Under the terms of the agreement, CNH would purchase from Kobe Steel a 20 percent stake in Kobelco Construction Machinery. CNH has an option to increase that position up to 35 percent in the future.
In North America, CNH would acquire a 65 percent interest in Kobelco America that will continue to manufacture and sell Kobelco excavators.
In Europe, CNH and Hitachi have reached a mutual agreement to end their European regional alliance on June 30, 2002, with CNH acquiring the Hitachi stake in Fiat-Hitachi at that time. This alliance did not allow CNH the global reach it required for its excavator business and was preventing Hitachi, which specializes in excavators, from becoming a full-line supplier of construction equipment.
CNH found the global partner it was seeking in the new Kobelco relationship, and Hitachi can pursue in the future its plans to become a full-line supplier of construction equipment in regions around the world, with January 2003 as the date for entry in the European market.
To best serve the customer, CNH and Hitachi have agreed to a smooth transition, over a period extending through 2003, from the current products to the new products developed under the CNH – Kobelco global alliance.
Upon the exit of Hitachi, CNH’s construction equipment business and Kobelco will form a new operation named Fiat-Kobelco, combining Fiat-Hitachi and Kobelco Construction Machinery (Europe) B.V. CNH will control 75 percent of the new entity, in which Kobelco will acquire 20 percent shareholding, with an option to increase it to 35 percent in the future. In Europe, the excavators will be sold under the new Fiat-Kobelco and Kobelco brands, independently of the Case network and brand which will be continuously supported by Sumitomo Construction Machinery.
In the Asia Pacific region, Kobelco will acquire 100 percent of CNH’s construction equipment operations, consisting of Australia, Asia and China. In addition, Kobelco will become an exclusive distributor of the Case and New Holland brands of construction equipment in Japan, Australia and South-East Asia, greatly expanding the product offering for the Kobelco networks in these markets and increasing sales of CNH product.
With the new partnership, CNH’s construction equipment business and Kobelco will adopt a multi-brand and multi-network strategy that will enable them to achieve greater economies of scale, purchasing savings and manufacturing efficiencies, and to further strengthen their distribution capabilities.
Case-Sumitomo Construction Equipment Relationship
The current relationship between Sumitomo and Case will remain intact in support of the CNH multi-brand and multi-network strategy. The alliance between CNH and Sumitomo is structured to ensure operations independent of the alliance between CNH and Kobelco. Sumitomo will continue to supply the Sumitomo excavator to the Case networks in Europe, Middle East, Africa, the Americas, and Australia. LBX, the existing American joint venture of CNH and Sumitomo, will maintain distribution of Sumitomo excavators via Link-Belt networks.
In Japan and Asia, Sumitomo will continue to supply the Sumitomo-branded excavators to support their existing dealer network and customers independently.
CNH and Sumitomo are evaluating a variety of European options, including the formation of a European Joint Venture, to supply Sumitomo excavators for the Case network, together with the feasibility of a CNH’s minority equity investment in Sumitomo.
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