The joint venture agreement formed between Manitowoc Company, Inc. (MTW) and Shantui Investment Co., Ltd. (“Shantui”) came to a premature end as Shantui opted out of the venture citing weakness in the Chinese construction machinery market. The collaboration to produce truck cranes had immense potential and was expected to revitalize the Chinese construction machinery industry.
The joint venture came into being in 2008 when Dongyue Heavy Industry Company was acquired by Manitowoc from Taishan Heavy Industries. Following the acquisition, Shantui and Manitowoc agreed to jointly invest in the company with Shantui owning 51% equity interest and the balance 41% held by Manitowoc.
The joint venture was planned to be engaged in the production of truck cranes, truck mounted cranes, and related parts and accessories. It also engaged in research and development, and offered training and after-sales support to customers. The joint venture was expected to begin operations following all relevant government approvals. The joint venture was planned to start with production of four truck cranes – the GT8, GT10, GT20 and GT25 – with capacities of 8, 10, 20 and 25 tons, respectively, with other models following in due course. Within China, the cranes produced by the venture were to be sold through Shantui’s domestic dealer network as well as Manitowoc’s dealer network for truck cranes.
China’s economic restructuring has affected governmental investment policies in the construction industry. This in turn has delayed necessary governmental approvals required for the joint venture and led to the termination of the venture by Shantui.
This is a blow to Manitowoc as the joint venture would have boosted its presence in China’s mobile crane market. However, the company will evaluate its options with its current partner, Tai’an Taishan Heavy Industry Investment Co., Ltd., with respect to the future of the Manitowoc Dong Yue business.
Manitowoc, Wis.-based Manitowoc is one of the world's leading innovators and manufacturers of commercial foodservice equipment. The company is one of the premier innovators and providers of crawler cranes, tower cranes, and mobile cranes for the heavy construction industry. These are complemented by a number of industry-leading product support services. Manitowoc currently retains a Zacks Rank #3 (Hold). Other stocks in the industry that are worth a look include Alamo Group, Inc. (ALG), Kubota Corp. (KUBTY), which retain a Zacks Rank #1 (Strong Buy), and Lindsay Corporation (LNN), which carries a Zacks Rank #2 (Buy).