Volvo maps route to asia expansion
Volvo, the world’s second largest producer of heavy trucks, is looking to make acquisitions and expand its range of medium duty trucks in order to improve its position in Asian market.
The Swedish group grew rapidly at the start of the decade with a series of acquisitions including France’s Renualt Trucks and Mack in the US, partly recycling money it raised from the sale of its car operations to Ford in 1999.
Heavy truck sales will reach record levels this year as strong growth in both North America and Europe fuels demand, however, less than 10 per cent of Volvo’s truck sales come from Asia.
Neither Volvo Trucks nor Renault Trucks have medium duty truck operations in Asia or North America, and only about 15-16 per cent of the European market.
“The medium duty market is the biggest in Asia, it is a natural way to progress and build presence there. Elsewhere in the world medium duty products are interesting from a distribution point of view and from the dealer network point of view to give them a complete range,” said Leif Johansson, chief executive.
Smaller trucks would help group improve its position in Japan where Volvo hopes to build its market share from 1 to 5 per cent.
Volvo’s previous attempt to expand in the region through an alliance with Japan’s Mitsubishi was thwarted by its main rival Daimler Chrysler. Since then there has been continuous speculation that Volvo will link up with Nissan Diesel.
Mr. Johansson said another way of increasing sales in the region would be to deepen joint ventures in China to produce local-style trucks rather than manufacture the more sophisticated models available in Europe.
The Financial Times, November 26, 2004
Suggest the Russian for the following word combinations.
To make acquisitions, to expand product range, to raise money, to fuel demand, to build one’s presence in the region, dealer network, to build a market share, to expand through an alliance,
to produce local- style trucks, sophisticated models.
T
ext
№ 3
Translate the article into Russian in writing.
What are the main peculiarities of the Ford-Fiat link-up?
A NICE LITTLE THING GOING
A Ford of Europe-Fiat tie-up may be just what’s needed to perk up their small cars
Only three weeks after General Motors Corp.’s acrimonious $2bllion divorce from Fiat was final in February, top managers from Fiat and Ford of Europe snuck off together at the Geneva auto show to discuss their own tieup. Eight months later, on Nov.7, the two auto makers sealed a deal to build their next generation small cars – the Fiat 500 and the Ford Ka – on the same platform. But theirs is not a full-fledged marriage, with all the attendant expenses and the clunky fusion of strategies. Their goal is to team up on the engineering and production for one model, slashing costs radically.
Many auto mergers forged in a euphoric rush to conquer the global market have failed to deliver the promised benefits – and some have turned into wrecks. DaimlerChrysler recently announced the sale of its remaining 12.4% stake in Mitsubishi Motors Corp. after writing off most of the $2.4 billion it pumped into the Japanese auto maker.
The Ford-Fiat alliance highlights the move toward a more pragmatic and limited pacts that bring results quickly to the bottom line. Fiat already collaborates with Pegeout on light commercial vehicles. DaimlerChrysler and Volkswagen have teamed up on minivans for the US market, while VW and Porsche have a linkup on sports-utilities. Ford and Fiat’s new tandem should save each partner roughly half of the $1.5 billion cost of developing a new model. “Ford gets low-cost access to Fiat’s small-cars technology, and Fiat gets to fill its factories,” says Christopher Stürmer, a senior auto researcher at Global Insight in Frankfurt.
Under the agreement, Fiat will manufacture the new Ford Ka and Fiat 500 at its plant in Tychy, Poland, on a shortened version of the platform for the Fiat Panda. The new models, targeted at the city-car niche where starting prices are around $ 10,000, are scheduled to hit European showrooms in 2008. They’ll be outfitted with Fiat engines and transmissions, but the shells and interiors will be different. The production goal is 240,000 cars, split evenly between each model.
The tieup will allow Ford of Europe to shift some of its manufacturing to low-cost Eastern Europe, without having to build a factory there. Wages in Poland are about 20% of those in Spain, where the Ka has been produced since 1997. “The problem with the Ka is that it is increasingly uneconomical to assemble bargain-basement vehicles in Western Europe,” says Stephen B. Cheetham, auto analyst at Stanford C.Bernstein & Co. in London.
Unless Ford and Fiat can boost their European sales dramatically, eventually they will have little choice but to shutter operations in the West, no matter how politically unpopular. Ford of Europe, which logged revenues of $26.5 billion in 2004, has been struggling to turn a profit for years. Although analysts forecast it will be roughly at breakeven in 2005, Ford’s European market share of 8.5% is down from 8.9% in 2002. The outlook is worse at Fiat Auto, which has piled losses since 2000. Despite the cost-cutting efforts of Chief Executive Sergio Marchionne, Fiat is expected to rack up a $363 million operating loss this year as sales continue their precipitous slide. Fiat’s European market share recently sank to a new low of 4.8%.
Marchionne is betting a slew of similar cooperative agreements can better Fiat’s bottom line.
Frankfurt-based Metzler Bank auto analyst Jürgen Pieper figures Ford and Fiat could make a profit in the “double-digit millions” on each model by producing in Eastern Europe. Besides erasing the red ink, the new small cars will be vital to keeping cutthroat Asian rivals at bay.
Business Week, November 28, 2005
NOTES
commercial vehicle – транспортное средство неиндивидуального пользования
ACTIVE VOCABULARY
to be at break-even – to reach the level of sales where revenues match costs – достигнуть уровня самоокупаемости/безубыточности
red ink – a situation in which you owe more money than you have – финансовая задолженность
to keep at bay - to prevent something serious, dangerous, or unpleasant from affecting you stake – доля, часть, участие (в какой-либо компании)
majority stake – контрольный пакет акций (majority shareholder)
minority stake - миноритарный пакет, второстепенное участие (в капитале), меньшая доля (minority shareholder )
to outfit – снабжать оборудованием, экипировать
bargain – 1) торговая сделка; 2) выгодная покупка; 3) pl. товары по сниженным ценам
to pile losses – накапливать убытки
Suggest the Russian for the following word combinations:
To seal a deal, full-fledged marriage, to team up on the engineering and production, to slash costs radically, to forge a merger, to sell the stake, to collaborate on light commercial vehicles,
to have a linkup with, to target at the market niche, production goal, to shift manufacturing to low-cost countries, to boost sales, to shutter operations, to be at breakeven, to pile losses, to rack up operating losses, to better the bottom line, cooperative agreements, to erase the red ink, to keep rivals at bay.
T ext № 4
Translate the article into Russian in writing and answer the following question:
Is low cost always the main reason for locating manufacturing operations abroad?
THE CHINESE ARE COMING … TO GERMANY
Selling high-wage Germany to outside investors isn’t an easy job these days. Unless, curiously enough, the foreign business executives come from low-wage China. In Hamburg alone, 42 Chinese companies set up shop last year, bringing the total in the city to 360. The State of North Rhine-Westphalia tallies another 100 Chinese outfits. Most are small shipping and trading companies, with just a handful of employees. A small but growing number, though, are manufacturers seeking access to the European market, and they’re even beginning to make acquisitions. A survey in north Rhine Westphalia found that Chinese doing business there prized German infrastructure and quality of life, though they complained about taxes. Welz Gas Cylinder, a maker of pressurized containers used for products such as fire extinguishers and beer kegs, was acquired in 2003 by China’s Huapeng Trading, a Hamburg-based importer.
Why would businesspeople from China, with super-low-cost production and compliant workers, want to produce in Germany, with its costly social welfare system and powerful unions? For Huapeng, which already sold Chinese containers to European customers, the acquisition of Welz was an opportunity to provide quicker delivery and servicing, particularly for the high-end market. Pressurized containers made in China can take four weeks to arrive in Europe. That’s all right for low-priced products. But when customers want quick service, Huapeng needs to be operating in Europe itself.
Shopping for know-how
But it’s also clear that the Chinese have something else in mind, acquiring German patents and engineering expertise. That’s one reason why China’s Shenyang Machine Tool Group recently bought Schiess, a 140-year-old maker of heavy-duty lathes and boring machines based in the East German town of Aschersleben. With 120 employees, Schiess typifies the Mittelstand machine-tool makers that are the backbone of the German economy. But even in East Germany where wages are lower than the west, a skilled worker earns $2,000 to $2,600 per month, versus $400 to $500 in China, says Schiess Marketing director Detlef Wolf. Schiess is already transferring production of smaller machinery, Shenyang’s specialty, to China. Production of Schiess’s core business in heavy-duty machines, where transport costs are a major factor, will remain in Aschersleben, Wolf says.
Meanwhile, Schiess will market Shenyang’s smaller machines to Europe, and Shenyang will be able to draw on Schiess expertise to produce large equipment for the Asian market. If it goes well, Schiess plans to add several dozen workers as it quadruples sales to $100 million by 2008. But the deal will also help China boost its modest but fast growing machinery exports to Germany, which last year topped $1 billion for the first time, a 34% increase over 2003.
More such deals are likely. International competition has put pressure on wealthy players, making them potential target. Are the Germans getting worried? Right now the country is desperate for investment to spur growth and cut unemployment. In this situation, the Chinese are welcome, especially since they have been mostly bottom feeding. Welz and Schiess, for example, were bankrupt when they were acquired.
China has also become a huge customer for Germany. In just two years, China has valued ahead of France, Britain, and Italy to become the No.2 buyer of German machinery, after the U.S. That’s vital to the German economy.
Business Week, February 21, 2005
NOTES
fire extinguisher – огнетушитель
beer keg – пивной бочонок
pressurized container – герметичный контейнер
bottom feeder – некто, берущийся за выполнение такой черновой работы, от которой отказались все остальные, или зарабатывающий на чужих проблемах
ACTIVE VOCABULARY
to set up shop - начать дело, открыть предприятие
high-end market – сегмент рынка дорогостоящей и высококачественной продукции
to draw on smth – заимствовать, почерпнуть
bankrupt – 1) обанкротившийся, неплатежеспособный 2) банкрот, несостоятельный должник
to go bankrupt - обанкротиться
5. customer - заказчик, клиент
Suggest the Russian for the following word combinations.
Outside investors, to set up shop, to seek access to the market, to make acquisitions, to provide delivery and servicing, high-end market, to acquire patents and engineering expertise, core business, to draw on expertise, to boost machinery exports, to spur growth.
Text № 5
Translate the article into Russian orally and answer the following questions:
What was the main motive of the US group for re-entering the Japanese market?
Was it reactive or proactive?