Creation of a Joint Venture

In April 1995, a JV called “Hefei Hitachi Excavating Equipment Co., Ltd.” was created in the economic technology development zone outside Hefei, some distance from Hefei Mining. The JV was primarily involved in the production of hydraulic excavators. The major shareholders were HCM, Hefei Mining, and Mitsubishi Shoji, in addition to Qiu Yonghan's investment company, the Qiu Yonghan Group. The company began with a total of 320 employees, with HCM bringing over 20 expatriates from Japan and 300 employees from Hefei Mining. HCM was responsible not only for sales, manufacturing, production technology, production management, and procurement functions, but was also in charge of management, because it had a 55 % majority stake and had provided the chairman of the board and general manager of the JV. At the time, it was rare for foreign firms to control management of JVs in China, and there were complicated negotiations regarding which side would lead the company. However, these difficulties were overcome through the efforts of the Hefei government. The JV primarily focused on sales and manufacturing of construction machinery. It procured simple parts (plate structures from welded steel plate, for example, booms, arms, and buckets) domestically, and imported all strategic parts (cylinders, engines, and hydraulic pumps) from Japan (Fig. 8.1 and Table 8.3).

Hefei Mining was a typical, large-scale, state-owned company with 2,500 employees with its own dormitories, hospitals, and schools. Although regarded as a quality manufacturer of mining equipment, it was incapable of designing the equipment independently, and the WY-type hydraulic excavators it produced, although less than half the price of Hitachi-manufactured excavators, exhibited poor performance and broke down quickly. With foreign firms' entry into the Chinese market via the market-liberalizing policies of the Chinese government, Hefei Mining's construction machinery quickly lost its market competitiveness. After the merger, HCMC made several proposals to revive Hefei Mining's operations; they also constructed a parts factory for HCMC within Hefei Mining that employed about 300 workers. This parts factory received technical guidance from HCMC. It primarily manufactured plate structures and supplied them to the JV, using production facilities and jigs loaned by HCMC.

Fig. 8.1 Hydraulic excavator

Table 8.3 Development of Hitachi Construction Machinery (China)


Creation of the joint venture


Change in brand name from “Hefei Hitachi” to “HITACHI”


Conversion from joint venture to wholly owned subsidiary

Creation of Hitachi Construction Machinery (Shanghai) to provide sales and service

Cumulative sales reach 1,000 units; operations in black


Kigawa Rijiro awarded by China's State Administration of Foreign Experts Affairs


Cumulative sales reach 5,000 units


50 hydraulic excavators exported to Japan


Creation of wholly owned subsidiary, Hefei Hitachi Construction Machinery

Creation of joint research center with Zhejiang University


Release of ZAXIS60 model for the Chinese market


Creation of Hitachi Construction Machinery Leasing (China) Co., Ltd.; 51 % participation in Qingdao Chengri Construction Machinery sales company


Deputy General Manager Xian Feng selected as National People's Congress Representative from Anhui Province

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