Auto-glass maker in­vests $200 mil­lion

In­cen­tives used to en­tice Fuyao into the deal but no de­tails were given

China Daily (Canada) - - ACROSS AMERICA - By MICHAEL BARRIS in New York michael­bar­ris@chi­nadai­lyusa. com

An agree­ment by Chi­nese auto- glass maker Fuyao Group Co to in­vest $200 mil­lion to es­tab­lish a man­u­fac­tur­ing op­er­a­tion in Ohio will open the flood­gates for more US- China man­u­fac­tur­ing deals, the leader of the Chi­nese le­gal team said.

“We will see more Chi­nese com­pa­nies set up man­u­fac­tur­ing fa­cil­i­ties in the US,” Shusheng Wang, se­nior prin­ci­pal with the Michi­gan law firm of Miller Can­field, told China Daily.

In what would be the largest in­vest­ment by a Chi­nese com­pany in the Mid­west­ern state, Fuyao’s North Amer­i­can sub­sidiary agreed to ac­quire more than 1 mil­lion square feet in Mo­raine, a south­west­ern Ohio city near Cincin­nati. The ac­qui­si­tion, ex­pected to close in the spring, would in­clude a Gen­eral Mo­tors Co ve­hi­cle­assem­bly plant which closed in De­cem­ber 2008, about six months be­fore the then-trou­bled US auto maker en­tered Chap­ter 11 bank­ruptcy pro­tec­tion, ac­cord­ing to a state­ment from the Ohio gov­er­nor’s of­fice.

The in­vest­ment would cre­ate at least 800 jobs over five years, start­ing in late 2015, the state said. The job cat­e­gories to be filled would in­clude pro­duc­tion, man­age­ment, engi­neers, qual­ity con­trol, fork­lift op­er­a­tors and main­te­nance and re­pair.

The state said it used in­cen­tives to en­tice Fuyao to make the deal, but re­leased no de­tails about the pack­age.

Wang called the agree­ment — which awaits the com­ple­tion of Fuyao’s due dili­gence re­search — “very ex­cit­ing”, say­ing it will boost Ohio’s econ­omy while act­ing as a bea­con for Chi­nese com­pa­nies con­sid­er­ing mov­ing man­u­fac­tur­ing op­er­a­tions to the US.

“For years, peo­ple crit­i­cized the Chi­nese be­cause they be­lieved they were tak­ing away the (US) man­u­fac­tur­ers,” the lawyer said. “Now the jobs are com­ing back.”

That the deal takes the form of an in­vest­ment rather than an ac­qui­si­tion shows how China is mov­ing for­ward to be­come a player in the global au­to­mo­tive mar­ket. In re­cent years, Chi­nese com­pa­nies have used ac­qui­si­tions, rather than in­vest­ment, to make in­roads in the global sup­ply in­dus­try. The trans­ac­tion that showed China was se­ri­ous about be­com­ing a ma­jor auto-parts sup­plier was the 2010 ac­qui­si­tion of Nex­teer Au­to­mo­tive by China’s Pa­cific Cen­tury Au­to­mo­tive Sys­tems. The $450 mil­lion trans­ac­tion stands as the largest Chi­nese takeover of a US sup­plier in au­to­mo­bile his­tory.

On that note, in a state­ment pro­vided by the state, Mark O’Con­nell, CEO of for­eign in­vest­ment firm OCO Global, noted that a $200 mil­lion in­vest­ment “from any­where in th­ese un­cer­tain times is an achieve­ment, but from China, where in­vestors fa­vor ac­qui­si­tions rather than new in­vest­ment, is very im­pres­sive”.

Fuyao, China’s big­gest auto glass maker, has been in the US since 2003.

Its fa­mil­iar­ity with US busi­ness prac­tices made it eas­ier to com­plete the trans­ac­tion, said Wang, who also led the le­gal team that han­dled the land­mark Nex­teer pur­chase.

“Fuyao has been here many years and are do­ing very well,” he said. “They are ready to do this. A lot of Chi­nese com­pa­nies are not ready. Al­though they have money and they have mo­ti­va­tion, they are not fa­mil­iar with how you do things over here. It is very dif­fi­cult to work with those com­pa­nies. That’s why we have to work very hard to ed­u­cate them.”

A US man­u­fac­tur­ing lo­ca­tion ap­peals to com­pa­nies such as Fuyao, a ma­jor sup­plier to GM and other au­tomak­ers. “If you want to be a global sup­plier, you need to be any­place the OEM (orig­i­nal equip­ment man­u­fac­turer) is lo­cated,” Wang said. “That’s an im­por­tant fac­tor for the Chi­nese com­pa­nies to set up plants over here.”

China is “still cheaper, but con­sid­er­ing the (costs of) ma­te­ri­als, the ship­ping, lo­gis­tics, ev­ery­thing – there is not that much ad­van­tage to man­u­fac­tur­ing all the prod­ucts in China,” he said.

With more than 18,000 em­ploy­ees world­wide, Fuyao, based in Fuzhou, Fujian prov­ince, also has lo­ca­tions in Ger­many, Rus­sia Ja­pan, South Korea, Aus­tralia and Brazil.

The Ohio plan is part of a plan by the Chi­nese com­pany to spend an over­all $420 mil­lion set­ting up sub­sidiaries in the US and Rus­sia, the Day­ton Daily News re­ported. Fuyao’s aim is to pro­duce 3 mil­lion sets of auto safety glass per year from the Ohio fa­cil­ity, ac­cord­ing to the news­pa­per.

In a state­ment pro­vided by the state, Fuyao Chair­man Cao De­wang said: “We ap­pre­ci­ate Ohio’s strate­gic lo­ca­tion, work­force and pro-busi­ness en­vi­ron­ment in mak­ing this de­ci­sion to open our North Amer­i­can fa­cil­ity. We are mak­ing such an in­vest­ment in Mo­raine to bet­ter ser­vice our im­por­tant OEM cus­tomers in the United States and North Amer­ica.”

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