Ningbo-based Huaxiang Group, a manufacturer of plastic auto parts, plans to buy an undisclosed British manufacturer of wood-veneer panels by early 2007.
Huaxiang, which started in the early 1970s producing plastic caps for ink bottles, will invest £5 million ($9.8 million) to acquire a high-end wood-panel manufacturer.
The firm does not want to disclose the name of the company it is acquiring until the deal is final. But in China, both companies already supply some of the same customers, namely General Motors and Peugeot - Huaxiang through a joint venture with Konrad Merkt GmbH of Spaichingen, Germany. The venture, Ningbo Merkt Auto Decorative Parts Co. Ltd., also supplies wood-veneer interior trim to Audi AG in China.
With high demand for wood-veneer interior paneling in China in both mid- and high-level vehicle segments, Huaxiang is expanding into a new niche market. Ningbo Merkt produces both wood-veneer and plastic-wood panels. The recently launched Cadillac SLS counts as Huaxiang's highest-profile customer for the real-wood product.
In 1972, Huaxiang Chairman Zhou Cimei started producing ink bottle caps, but the factory was closed by the government during the Cultural Revolution when Zhou was accused of being a capitalist. The charges were cleared in the late 1970s and he re-opened the factory in 1979.
On the 2006 Forbes magazine list of richest people in China, Zhou is listed at No. 283, with assets of $130 million.
Expanding from ink bottle tops to radio parts, then copier parts and typewriters, Huaxiang got its big break in 1991 when the company won a contract to supply Shanghai Volkswagen's Santana with plastic air-conditioning parts. Since then, the company has expanded to supplying plastic parts ranging from electronic harness systems to engine accessories and interior trim.
Huaxiang exports electric harness systems and instrument panel shells to Volkswagen, GM, Isuzu and Honda, and it also supplies the aftermarket in the U.S. and Europe.
Zhou said his company does its own research and development, owns its mold suppliers and uses plastics materials from multinational firms like BASF, Bayer and GE Plastics. Zhou said he also uses high-quality local plastic material suppliers if the customer asks for a less expensive product.
Most of the plants in Huaxiang's manufacturing base in Xiangshan, near Ningbo, use mainly locally produced Haitian injection molding machines and imported Engel and Mitsubishi presses.
Huxiang Group has nearly 30 subsidiaries, including a publicly traded company listed in Shenzhen and run by Zhou's younger son. It also has joint ventures with Volkswagen and Schlemmer, both of Germany, and Japan's Isuzu.
Its most profitable line, sun visors, accounted for $2 million of the firm's 2005 sales of $322 million.
