It was learned from Eaton (China) Investment Co., Ltd. that two joint ventures of Eaton’s production of commercial vehicle transmissions in China had dissolved or transferred all of the shares. Eaton began building factories in China in 1997 to produce commercial vehicle transmissions. Ten years have passed, and its transmission sole proprietorship and the development of joint venture companies are not satisfactory.
The twists and turns of the three companies
Founded in 1911, Eaton USA is one of the world's leading manufacturers of automotive transmission systems. It is understood that as early as 1985, Eaton had signed a technology transfer agreement with Shaanxi Fast Gear Co., Ltd. to introduce the Fuller transmission technology that was then known as the “world trump card†to China.
In July 1997, Eaton established a wholly-owned Eaton Truck Parts (Shanghai) Co., Ltd. in Shanghai, which mainly produces heavy-duty truck transmissions.
Eaton shifted the production of transmissions to China, and at the time, Fast, which had introduced Fuller transmission technology and lacked funds, felt a certain amount of competitive pressure. According to reports, Fast has actively sought cooperation with Eaton. However, the latter did not like this and expressed their confidence in the Chinese market.
However, in January 2004, Eaton established a joint venture with Fast and Hunan Torch Investment Co., Ltd. to establish Eaton Fast Gear (Xi'an) Co., Ltd. According to the disclosure, Fast has 23 percent of the registered capital of the joint venture company, Hunan Torch has 22 shares, and Eaton has 55 shares. In March of the same year, Eaton established a joint venture with FAW Jiefang Automobile Co., Ltd. to establish FAW Eaton Transmission Co., Ltd., with each holding 50 shares. The joint venture produces a full range of medium transmissions.
Recently confirmed to Eaton China that Eaton Fast (Xi'an) Gear Co., Ltd. has been officially disbanded. In September 2007, Eaton Corporation transferred its entire share of the joint venture to FAW Jiefang Automobile Co., Ltd.
It was also learned that Eaton’s sole proprietorship for transmission production in Shanghai had stopped production on the eve of the establishment of the joint venture company with Eaton Fast. Currently, only small-scale transmission assembly is being carried out.
According to industry sources, Eaton may be looking for the next partner. However, this news has not been confirmed by Eaton China.
Two statements
The reason why the joint venture company of Eaton China was asked to disband or transfer all the shares of the joint venture company in Eaton China was answered: In addition to the statement, they are now commenting on the inconvenience of other issues.
From the Eaton China side, they obtained two joint statements on the two joint ventures. A statement on the Eaton Fast joint venture stated: "While all parties to the joint venture continue to be optimistic about the Chinese market, the original joint venture agreement has been unable to continue supporting the long-term sustainable development needs of their respective businesses. Therefore, we hope to adopt different strategies to develop each one. Peacekeeping in China's business. After friendly discussions among shareholders, all parties agreed to dissolve the joint venture. We believe that this decision is the best long-term solution for suppliers, customers and employees."
The Eaton and FAW joint venture statement stated: "Eaton and FAW believe that the current business structure does not meet the development requirements of both parties. The two sides agreed that in the long run, changes in the equity of the joint venture company will be the most important to suppliers, customers and employees. At the same time, we are also very excited to see that the company is now able to provide FAW with an industry-leading new technology for truck transmissions. Eaton will continue to be a FAW partner and supplier."
According to statistics, Fast had established a joint venture with Eaton in 2007 with sales revenue of 6.043 billion yuan, a year-on-year increase of 89; production and sales of heavy-duty transmissions both exceeded 430,000, a year-on-year increase of more than 88, ranking first in the world; The foreign exchange earned through exports totaled 30.20 million U.S. dollars, and its share in the heavy-duty transmission market of more than 8 tons in China increased by 11 percentage points to 86.
Several arguments
What are the reasons that caused Eaton's transmission business in China is not smooth? Paul, the general manager of FAW Eaton Transmission Co., Ltd., once said in an interview: “Eton’s establishment of a sole proprietorship in China has encountered cultural differences and high costs between China and the West. Earlier, we established in Shanghai. A wholly-owned company is not very successful."
Some people believe that the high cost of transnational operations has led to high product prices, coupled with the lack of understanding of China and the lag in sales network construction, which has caused Eaton’s original products to gradually lose competitiveness in the Chinese market. In addition, China's commercial vehicle transmission companies, represented by Fast, are putting pressure on Eaton. “Fast, which has benefited from independent innovation, has developed rapidly in recent years. Their products are more suitable for the use of commercial vehicles in China and also have a cost advantage,†said one person in the industry.
Another industry insider who did not want to be identified revealed his judgment: “Eaton may lack understanding of the highly competitive Chinese heavy-duty truck transmission market. China's heavy-duty truck transmission technology will soon be replaced. If you follow the normal development and governance procedures of foreign parties, there are many things. It will be delayed.†He added that there may be differences in the targeting of the two parties.
The industry’s arguments have been confirmed to some extent. In some reports, insiders of the joint venture company once said that Eaton has been secretly restricting the independent development of Fast, and all foreign companies in the joint venture have the final say. Such a strong attitude makes China uncomfortable.
Others believe that Eaton’s practice is common in current auto parts joint ventures. If a joint venture wants to succeed, it must first establish a foundation of mutual trust and mutual respect. If we don't have this foundation, it would be inevitable for Eaton to encounter China.
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