DEUTZ in China

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Posted in: , on 22. Dec. 2006 - 19:56

DEUTZ launches joint venture in China

• Co-operation with FAW upgraded to a joint venture

• Growth boosted in Asia, the world's fastest-growing region

• Additional annual unit sales of over 100,000 engines

DEUTZ AG and FAW Jiefang Automotive Co., Ltd., which is based in Changchun, China (FAW), a wholly owned subsidiary of China First Automobile Works Group Corp. (FAW Group), have today signed a contract to set up a joint venture to manufacture and sell diesel engines. DEUTZ and FAW will each own a 50% stake in the joint venture, which will operate under the name of DEUTZ (Dalian) Engine Co., Ltd. (DEUTZ Dalian). DEUTZ will assume industrial leadership of the company and will invest the equivalent of €60 million in the new company. The joint venture will be based in Dalian, a port city in the north-east of China with over 5.5 million inhabitants. The contract is still subject to the usual approvals for transactions of this nature.

The establishment of DEUTZ Dalian will considerably expand the cooperation that has already existed for over 10 years between DEUTZ and FAW Group. FAW will contribute to the joint venture particularly its new cutting-edge plant that manufactures licensed DEUTZ engines. Production commenced earlier this year. Its initial annual capacity as from 2007 will be 50,000 engines, and this could eventually be increased to 100,000 engines. It will manufacture engines with a capacity of between 4 and 7 litres that meet the current emission standards. The engines will be used in commercial vehicles and in industrial applications such as construction equipment and agricultural machinery. They will mainly be sold to international DEUTZ customers in Asia and to the FAW Group. The joint venture will also have sufficient capacity to manufacture a further 100,000 or so local engines for the FAW Group and the local Chinese market.

This investment is a tangible expression of the growth and internationalisation strategy being pursued by DEUTZ. The co-operation with FAW will also strengthen DEUTZ' position in the global commercial vehicle segment. At the same time, DEUTZ Dalian will benefit from the expertise of DEUTZ AG in the industrial-engines market. After Cologne, the new site at Dalian will be DEUTZ' largest production facility, and the synergies from the production sites will improve the DEUTZ Group's cost base.

Gordon Riske, Chairman of the Management Board of DEUTZ AG, commented at the official signing of the contract in Changchun, China:

"This joint venture presents a unique opportunity to increase our exposure in DEUTZ' largest regional growth market and, at the same time, to accelerate our growth in the market for 4- to 7-litre engines. FAW is also the ideal partner for us in our efforts to expand our strategic cooperations, and this will enable us to exploit new markets that have previously been covered by vehicle and equipment manufacturers with their own production facilities."

China First Automobile Works Group Corp. is the largest supplier in the Chinese commercial-vehicle market. It produces light, medium-sized and heavy trucks as well as buses. It also specialises in making cars.

DEUTZ generates annual sales of around €1.3 billion and is one of the world's leading independent manufacturers of diesel and gas engines, which are used in construction equipment, power-generation plant, agricultural machinery, commercial vehicles, rail vehicles and ships.

The output of the engines DEUTZ produces ranges from 4 kW to 4,000 kW. DEUTZ' clients are supported by 17 distribution companies, 12 sales offices, 16 service centres and over 800 sales and service partners in more than 130 countries around the world.

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