China carves up German industry
All the talk at the beginning of this year’s Intermat was Sany’s purchase of Putzmeister by the end it was about the ramifications of XCMG’s taking of Schwing-Stetter. Those concerned about the protection of jobs in Europe’s most powerful manufacturing sector had their worst fears confirmed when Schwing GmbH, Germany’s second largest maker of […]
Buying Schwing is one step towards XCMG becoming a top-three company
All the talk at the beginning of this year’s Intermat was Sany’s purchase of Putzmeister by the end it was about the ramifications of XCMG’s taking of Schwing-Stetter.
Those concerned about the protection of jobs in Europe’s most powerful manufacturing sector had their worst fears confirmed when Schwing GmbH, Germany’s second largest maker of concrete machinery, announced it was cutting more than a fifth of jobs at its headquarters in Herne ahead of the company’s sale.
According to Eva Kerkemeier of the IG Metall trade workers union, the loss of 170 jobs out of the 800 workforce was most likely a pre-condition of the sale to XCMG, which currently only contributes $317 million out of the total $17 billion industry.
XCMG chairman Wang Min did not reveal the exact amount of the acquisition in his official statement announcing the deal, but he did remark in a subsequent announcement that Schwing’s German management team will keep their positions after the purchase.
Coincidentally, the Schwing/XCMG announcement came one day after Sany completed its own acquisition of the leading German pump maker Putzmeister Holding GmbH for $425 milliion.
Once finalised, Europe will be facing up to a situation where three of its largest concrete pump manufacturers will have all been acquired by Chinese companies. Changsha Zoomlion Heavy Industry bought leading Italian formwork and concrete handling specialist CIFA (the second largest company of its kind in Europe at the time) in 2008.
Like Putzmeister, Schwing is a family-owned operation. The company has a global footprint employing over 3,000 people. XCMG will now proceed with the application for a $210 million loan worth to refinance a bridge loan to help finance the Schwing acquisition, said Thomson Reuters. Banks will be invited to join the three-year term loan (a road show was scheduled to begin on 25 April 25 in Hong Kong).
A spokesperson at Intermat told the event’s show daily that the acquisition would be a “big thing” for the global industry, confirming that the company wants to be a “top three” construction company by 2015.
After the event it was revealed that the unnamed source was pre-empting talks that were occurring behind closed doors.
CMME understands the deal was sealed between executives at the Paris event. To date no information has been revealed on how much and for what price Schwing made XCMG pay to secure a majority holding of the business.
However details have begun to emerge, including the confirmation that chairman and owner Gerhard Schwing will remain in his position. The brand will also remain.
Alfonso Urzola, manager of international services at Schwing Stetter, revealed that production would continue as normal at the company. He added that this was a move to strengthen the company’s position in the emerging markets.
“The plan is to increase the sales of pumps in China through this partnership,” Urzola said.
Understandably inside Germany, the dissolution of its grip on its manufacturing base to the Chinese has not been well received by all parties. Especially as these are companies that have been cultivated over decades and often the largest employers in their local towns and regions.
Putzmeister experienced industrial action by its workforce, a rare event in Germany. Assurances about preserving the workforce until 2020 have not convinced some about the long-term security of German production – it is rumoured that septuagenarian owner Karl Schlect is now outcast in his own cafeteria.
The major question for Germany is whether these are opportunistic moves by owners looking to raise funds for their own pensions or attempts to stave off long-term decline and face up to the realities of the construction machinery industry in the 21st Century.
