Farrel to sign with Chinese partner

By David Shaw, ERJ staff

Dusseldorf, Germany--Alberto Shaio, chief executive officer of Farrel Corp expects to sign a joint venture with a Chinese machinery maker in the next few days.

Speaking at the K show, Shaio told ERJ that his company expects to sign the deal in early November. The Chinese company will assemble kits of parts shipped to them by Farrel. Some of those parts will come from Farrel's US facilities, but most will come directly from Farrel's out-sourcing partners, many of whom are in the Asia-Pacific region, said Shaio.

Shaio said, "the first set of equipment will be shipped before the end of 2004 and the first completed machines will be delivered early in 2005." He added that he was not prepared to name the company until the deal is finalised, but " the company I am talking about is one of the better-known companies in the tyre business, but they are not in the mixer business. They sell products and services to the tyre business, on the machinery side; not materials."

Shaio continued, "we are going to contribute equally to the joint venture. We are important to them, for the name and reputation; they are important to us for their knowledge of the Chinese market and the customers and culture.

Shaio said, "we believe we have a better than 50 percent market share of the mixers in China. The trouble is that we are not making much money there, so we have to find a way to produce these machines for a lower cost. We can do that with locally-made components, but we can reduce the costs [still further] if we eliminate shipping and we use local labour to assemble the machines." He concluded, "they will assemble our equipment for us in China for Chinese customers."

Shaio said Farrel has been outsourcing components to manufacturers in the Asia-Pacific region for 14 years, and now has over 1500 parts made in the region, "so we know what we are doing and we know what to look for in a partner."

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