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Chinese dragon spreads its wings

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2nd March 2006

Page 28

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Page 28, 2nd March 2006 — Chinese dragon spreads its wings

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CIMC plans to be the world's number one trailer maker by 2008.

As Brian Weatherley

reports, the recent acquisition of Burg Industries puts it one step closer.

Last year. CM ran a story about a "little-known company called China International Marine Containers" and its plan to become the world's largest trailer maker by 2008.-Who," we asked innocently,-is CIMC?" But we're quick learners, so for readers who still don't know who CIMC is, here's the potted version.

Since its launch in 1980. CIMC has grown to become the world's leading container maker in terms of output and sales, with 40% of the world's container business and more than 50% of the global reefer container market. CIMC also builds semi-trailers lots of them. Its six plants in China currently churn out more than 40,000 semis a year; back in 2005, CIMC president Mai Boliang dedared:"Our goal is to become the world's largest trailer maker by 2008." One major axle manufacturer told us: "They're probably already there."

Last year we pondered how CIMC might achieve that ambition. Aside from its vast and rapidly expanding domestic market, it has been busy exporting fully built-up skeletals to the US and Japan.

Global players need global operations, not least in terms of production facilities, and CIMC hasn't stood still in this field either.

Three years ago, it paid $4.5m (f2.4m) for the manufacturing assets of an underperforming American trailer company in Indiana. It relaunched this as Vanguard NationalTrailer Corporation with the intention of building up to 8,000 units a year using 10% of all the sub-assemblies shipped in from China.

These numbers may seem modest, but the North American trailer market hit 228,907 units in 2004 which gives Vanguard and CIMC plenty to aim for.

European arena

If you want to be the world's number one, sooner or later you'll have to take a whack at Europe. Last year CIMC was noticeably absent from that arena but not now. Around Christmas, CM picked up rumours that it was close to snapping up a European trailer manufacturer. Those rumours proved true: three weeks ago CIMC signed a draft agreement with Peter and Cees van der Burg, the shareholders of Burg Industries BV, to establish a new joint company called NEWCO.This will ultimately own 100% of Burg, whose assets are valued at €110m.

The deal has to be approved by Chinese and EU officials, but once it is complete CIMC will own 75% of the entire issued share capital of NEWCO to take majority control of the group; the Burg brothers will hold the remaining 25%.

For the uninitiated, Burg Industries is a D u tch -based, €300m-turnover company which owns the major trailer brands Burg, LAG and Hobur. Last year it built 3,000 trailers of all types, making it a significant player in the European tanker, bulker and specialist dry freight trailer markets.

Equally signif leant is the fact that Burg's road transport division has trailer production facilities in four European countries including the Netherlands. Germany and Poland.

However, there's more to Burg than just trailers. It's also a major intermodal/tank container builder as well as the manufacturer of hulk storage and processing tanks for the brewing, chemical and soft drinks industries with sites in Europe and South Africa.

So what is Burg's role in the CIMC plan? While the Chinese are doubtless still working on their final strategy, CI MC says it will see an "improvement through technology transfer of its existing product range in mainland China in the field of road transport equipment".

So for the moment, any product 'traffic' will be heading eastwards, as Burg CEO Cees van der Burg explains: —Iiransport is still relatively unsophisticated in China and the Chinese chemical companies need safe transport."

In return. CIMC will not only gain access to the Burg Group's sales and manufacturing resources throughout Europe; it will also get a foothold in the European trailer market,which last year hit 95,000 units. And according to industry analyst Gary Beecroft from Clear Consulting: "By 2008 the market will reach a record level, exceeding 140,000 vehicles."

So where might CIMC's acquisition of Burg (despite both parties referring to it as a "merger") ultimately lead?

Manufacturing synergies

cimC could use Burg's European factories to build low-tech, very competitively priced products like skeletals or platforms using complete chassis or sub-assemblies supplied from China. This would complement Burg's own specialist product line-up, including LAG tankers where "a custom-made trailer leaves the factory every 50 minutes".

Although van der Burg refuses to speculate on such possibilities, he doesn't dismiss them either. When it comes to NEWCO he simply says: "I think there are excellent synergies just drifting over the edge all the time. Burg is a company that builds from engineering order whereas CIMC is a mass-production company.

"It has a clear interest in our products and is interested in penetrating deeper in the [world] market—hut there are all kinds of possibilities and more than just trailers," Europe's big hitters will be wondering what those "possibilities" might mean to them. In 2004, Europe's No 1 Schmitz built 36,000 trailers—but by 2009/10 aims to be building 65,0(X) a year, with the long-term goal of "a technical production capacity in excess of 80,0(X)".

Meanwhile, if CIMC wants to become the world No l , overtaking the likes of Wabash and Great Dane along the way, it has two years to do it. Considering its performance in the container business, we wouldn't bet against it. •