Demag Plastics Group may end its joint venture that manufactures injection presses in China, saying it is looking at options to beef up its technology and presence in that fast-growing market.
A DPG executive said at the Chinaplas trade show that the firm wants to make changes in its 7-year-old venture with Ningbo Haitian Group Co. Ltd. - one of the largest foreign investments in injection press manufacturing in China. He said DPG is considering options that range from severing ties to strengthening the partnership.
DPG needs a stronger presence in China to meet rapidly increasing demands for better technology from customers there, said Johannes Strassner, executive vice president of sales for Schwaig, Germany-based DPG. The firm wants to make a decision by the end of the year with Haitian, he said.
``We are clarifying with our joint venture partner the options for the future,'' Strassner said during a June 22 interview at Chinaplas, held in Guangzhou. Even if the partnership ends, DPG will manufacture in China, he said.
``There is a tremendous technology upgrade in the market,'' he said. ``Our customers are requesting more and more, due to strong increases in automotive, and more and more customers are increasing their export activities.''
Haitian senior officials were not available for comment.
While Demag has had its share of challenges lately, with its top two executives leaving in April and reports that its parent, plastics machinery giant Mannesmann Plastics Machinery GmbH, is for sale, Strassner said the China venture has been successful.
The venture, Demag Haitian Plastics Machinery Ltd., in the coastal city of Ningbo, has made about 1,000 presses, and Demag has sold another 2,000 presses in China made at its plants elsewhere in the world, Strassner said.
DPG formed the venture in 1998, when it was difficult for a foreign firm to enter the China market on its own, he said. The venture is operated and managed separately from Haitian's other plants in Ningbo, where it is based.
The venture, which is 60 percent owned by DPG, has seen substantial investments lately, doubling its manufacturing capacity in early 2004. It now can make about 600 presses a year. But Strassner said market demands have changed in the past year.
The venture's machines typically are made with some downsized hydraulic and technical features, and may not integrate things like hot runners and automation as easily as DPG machines made elsewhere, he said. But its customers, whether foreign or Chinese companies, want that higher technology, Strassner added.
He said the Chinese market slowed down in early 2005, dropping dramatically for a few months as Beijing tightened credit and the euro rose in value. But the market since has strengthened, as both those conditions have reversed, Strassner said.
Demag had sales of 343 million euros ($415 million) in fiscal 2004, ended Sept. 30.
