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CNH and Kobelco End Alliance: North America One of Several Markets Where Kobelco Will Rebuild Sales & Service Network


Kobe Steel, Ltd. and group company Kobelco Construction Machinery Co., Ltd. announced that the initial term of their global alliance with CNH Global N.V. will end on Dec. 31, 2012. CNH also made a similar annoucement. The parties determined not to renew their agreement.

The global alliance, which began in January 2002, was set for a 10-year period. With the market environment changing over the past 10 years, Kobe Steel, Kobelco Construction Machinery and CNH have been re-examining the agreement and discussing the future of their global alliance. Looking ahead at future market conditions, Kobelco Construction Machinery and CNH have mutually decided to operate their businesses on their own, and with the initial term of the original agreement ending on Dec. 31, 2012, the three companies decided not to renew their alliance.

According to Kobe Steel press release, the cooperative relationship among the three companies for 10 years under the global alliance has been meaningful and significant. From now on, while respecting their positions, Kobelco Construction Machinery and CNH will grow their own business operations throughout the world.

Under the global alliance with CNH, Kobelco Construction Machinery's sales and marketing rights were limited to the Asia and Pacific area, including Australia. From Jan. 1, 2013, Kobelco Construction Machinery will market and provide services on its own in North America, Europe, South America, the Middle East, Africa, and the CIS countries. With the ending of the global alliance, equity participation with CNH will also be terminated. At the end of the year, Kobe Steel will buy back the 20-percent equity that CNH currently holds in Kobelco Construction Machinery. As for the equity that Kobelco Construction Machinery holds in CNH's affiliate companies, the shares will be sold back to CNH.

After the initial term of the global alliance ends, CNH will continue to be entitled to manufacture and sell hydraulic excavators currently licensed from Kobelco Construction Machinery. In addition, for a five-year period until the end of December 2017, CNH will have the right to procure hydraulic excavators from Kobelco Construction Machinery on an OEM basis. Servicing parts will continue for 10 years.

Kobelco Construction Machinery will have the right to receive running royalties for the licensed hydraulic excavators manufactured by CNH for a five-year period until the end of December 2017.

History of the CNH - Kobe Steel - Kobelco Global Alliance

In September 2001, Kobe Steel, Kobelco Construction Machinery and CNH signed an agreement to form a global alliance. In January 2002, Kobe Steel transferred 10 percent of its shares in Kobelco Construction Machinery to CNH. In addition, Kobelco America Holdings Inc. transferred 65 percent of its shares in Kobelco Construction Machinery America L.L.C. to CNH.

In July 2002, Kobe Steel transferred an additional 10 percent of its shares in Kobelco Construction Machinery to CNH. Kobelco Construction Machinery transferred 100 percent of its shares in Kobelco Construction Machinery (Europe) B.V. to CNH. At the same time, Kobelco Construction Machinery received from CNH 20 percent of the shares in New Holland Kobelco Construction Machinery S.p.A., a manufacturing and sales unit in Europe.

Kobelco Future Plans

With the ending of the global alliance with CNH Global N.V., Kobelco Construction Machinery Co., Ltd. from January 2013 will be able to grow its business on its own and sell the KOBELCO brand hydraulic excavators in world markets. These machines are well-known for their advanced technologies such as low fuel consumption, low noise and onboard GPS. Kobelco Construction Machinery will build its own sales network and promote the KOBELCO brand around the world.

With the ending of the global alliance with CNH, Kobelco Construction Machinery will independently rebuild its sales and service network in North America, South America, Europe, the Middle East, CIS and Africa. It will once again conduct business activities in those markets. Prior to the formation of the global alliance, Kobelco had been operating on its own in those six areas. The KOBELCO brand is especially highly regarded in North America and South America, and those markets have high expectations for Kobelco Construction Machinery's re-entry.

Kobelco Construction Machinery will immediately place on the markets of those six areas its latest models with core features of lower fuel consumption, lower noise and onboard GPS. New models that also comply with the latest exhaust gas regulations will be launched onto the North American and European markets starting from April 2013. Kobelco plans to develop products that meet local needs and enter markets where it was unable to directly play an active role under the global alliance with CNH. It also aims to increase its sales volume and market share that had gone down under the global alliance.

By conducting business activities closely at the local level, Kobelco Construction Machinery will be able to give feedback on customer needs to its Global Engineering Center (GEC) in Itsukaichi, Hiroshima City, Hiroshima Prefecture, Japan, for product development. For the time being, Kobelco Construction Machinery plans to utilize its current plants in Japan, China, Thailand and India to meet its requirements.

In Japan, China, Southeast Asia and Oceania, Kobelco Construction Machinery has established its solid presence by its direct sales and marketing activities. In the six areas that it will re-enter, Kobelco Construction Machinery believes it can increase sales volume and expand market share. Kobelco Construction Machinery is aiming to gain new markets, which it was unable to do under the alliance with CNH.

The 10 years of the global alliance divided the world's marketing areas between Kobelco Construction Machinery and CNH. Kobelco Construction Machinery was devoted to strengthening its businesses in Japan, China, Southeast Asia and Australia. This enabled Kobelco Construction Machinery to focus its management resources on rapidly growing Asia including China and Southeast Asia. The company currently has one plant in Thailand, two in China, and one in India. In May, Kobelco Construction Machinery moved to Itsukaichi, Hiroshima to establish a state-of-the-art production facility and system that improves its competitiveness both in Japan and overseas.

The establishment of the GEC promotes advanced technical development and product development drawn on customer needs. As the mother facility, the Itsukaichi Factory provides feedback to the plants in Thailand, China and India. Implementing a detailed sales policy and offering an improved sales and service network, Kobelco Construction Machinery has captured a market share of over 20 percent in Japan and Southeast Asia, 13 percent in China (among foreign-affiliate manufacturers), and 10 percent in Australia. Kobelco Construction Machinery will continue to focus on China, Southeast Asia and India, where high growth is expected to continue.

CNH Future Plans

Under the new, non-exclusive licensing and supply agreements, which take effect on Jan. 1, 2013, CNH and Kobelco Construction Machinery are unwinding their joint ownership and equity participations in all the companies formed in connection with their previous alliance and eliminating any geographical exclusivity rights associated with their agreements. CNH will continue to manufacture hydraulic excavators incorporating current Kobelco technology at its Calhoun, Ga., USA, San Mauro, Italy and Belo Horizonte, Brazil, manufacturing facilities and will continue to source select models, including short-radius excavators, from Kobelco in Japan for no less than five years and component parts no less than ten years.

Moving forward, CNH will market full-sized excavators featuring Kobelco technology under its New Holland Construction brand and compact excavators under its New Holland Construction and Case Construction Equipment brands.

"This change in our relationship gives CNH Construction Equipment the opportunity to build a stronger future for our customers, dealers and overall business," said Mario Gasparri, head of CNH's Construction Equipment brands. "This change is vital because it lets us directly manage our business in all regions around the globe, including the Asia-Pacific region, which is home to the world's fastest-growing construction equipment markets. More than that, it allows us to leverage the industry-leading technologies and resources available to us as part of CNH Global and Fiat Industrial to better address customer needs."

Profile of CNH

Name CNH Global N.V.
Established November 1999 (merger of Case Corporation and New Holland N.V.)
Headquarters Burr Ridge, Illinois, USA (Registered in the Netherlands)
President & CEO Richard Tobin
Business Manufacture and sale of agricultural and construction equipment, financial services
No. of employees About 30,000
Sales US18.1 billion (in 2011). Construction equipment comprised 21 percent.
Major shareholder Fiat Industrial S.p.A.
Website www.cnh.com


Profile of Kobelco Construction Machinery

Name Kobelco Construction Machinery Co., Ltd.
Established Oct. 1, 1999
Headquarters Tokyo, Japan
Capitalization 16 billion yen
Shareholders Kobe Steel 80 percent, CNH 20 percent
President & CEO Jun Fujioka
Business Manufacture, sale, and servicing of construction and transport machinery
Employees 983 (7,009 in entire Kobelco Construction Machinery Group), as of April 1, 2012
Consolidated sales 307.1 billion yen ( for fiscal year ended March 2012)
Website www.kobelco-kenki.co.jp


Article Date: 2012-12-26
Source: Kobe Steel and CNH Global NV
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