MAN-Sinotruk: when is a JV not a JV?
By: Alan Bunting, Thursday, October 22, 2009, AutomotiveWorld.com
When is a joint venture not a joint venture? It is a question which has arisen following the agreement concluded recently between German truck and bus maker MAN and the Chinese commercial vehicle manufacturer Sinotruk. The agreement is for Sinotruk to produce MAN's TGA range heavy trucks, including engines and other essential components in China.
MAN Nutzfahrzeuge CEO Anton Weinmann insists that the licensing deal with Sinotruk is essentially different from previous links established between European or North American truck makers. He has reaffirmed the determination, expressed some three years ago by his predecesor Hakan Samuelsson (now MAN Group CEO), that the company would never countenance the kind of joint venture which would open the door for a Chinese partner to exploit MAN's advanced technology - especially in regard to vehicle powertrains - for its own ends.
The way in which EGR is applied on MAN's 10.5-litre D20 and 12.4-litre D26 engines to meet demanding emission standards while optimising fuel consumption is reckoned to be crucial in the deal
Accordingly, the tie-up with Sinotruk is based on MAN acquiring a 25% stake in the Chinese business, with three accompanying seats on the Sinotruk board, occupied by Samuelsson, Weinmann and the German company's chief finance officer Karlheinz Hornung. The German trio will constitute what is being described as a 'blocking minority', with an overriding say-so on how MAN's advanced diesel technology is used.
The way in which EGR (exhaust gas recirculation), in combination with two-stage turbocharging, is applied on MAN's 10.5-litre D20 and 12.4-litre D26 engines to meet demanding emission standards while optimising fuel consumption, is reckoned to be crucial in the deal, under the heading of intellectual property. Under what is seen as a unique agreement between a western and a Chinese company, Sinotruk will pay licence fees to MAN, specifically in relation to the use of the latter's technology. Another clause in the agreement provides for MAN to receive a share of the profits from the sale of vehicles embodying the licensed technology.
Some observers have contrasted the MAN-Sinotruk deal with the joint venture established in China by MAN's main (and only German) rival Daimler, with Foton Motor Co Ltd. That deal involved the formation of a new company, Beijing Foton Daimler Automotive Co Ltd. But the terms of the joint venture have been implicitly criticised by MAN because BFDAC remains wholly under Chinese financial control, allegedly leaving the door open for Foton to copy Daimler technology in future 'home grown' vehicle developments, without the holder of patents and/or design rights being properly rewarded.
Chinese manufacturers need the kind of advanced powertrain technology which, within the timeframe, can only be obtained through collaborations with western companies such as MAN and Daimler
Both Sinotruk and Foton are striving to meet new Chinese truck and bus emission requirements, dubbed 'National IV' and 'National V', which are based closely on Euro 4 and Euro 5 limits. These emission laws are currently scheduled to come into force in 2010 and 2012 respectively, but because of depressed demand for commercial vehicles in China due to the global downturn, they are expected to be put back by at least two years.
Nevertheless, Chinese manufacturers need the kind of advanced powertrain technology which, within the timeframe, can only be obtained through collaborations with western companies such as MAN and Daimler.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Published on Thursday, October 22, 2009
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