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Kobelco launches second construction machinery plant in China
Inland and coastal plants strengthen excavator business
October 12, 2005

TOKYO, October 12, 2005 - Kobelco Construction Machinery Co., Ltd., a group company of Kobe Steel, Ltd., announced the formal start of production of hydraulic excavators at its joint venture, Hangzhou Kobelco Construction Machinery Co., Ltd., in Hangzhou, Zhejiang Province, China.

The joint venture has a production capacity of 1,500 excavators per year. Hangzhou Kobelco is 51% owned by Kobe Steel, 27% by Toyota Tsusho Corporation, and 22% by Chengdu Jialixing Investment Co., Ltd., a Chinese investment company.

Hangzhou Kobelco is actively supplying excavators in the Chinese market, particularly to meet demand in Eastern China. Owing to its location on the coast, Hangzhou Kobelco also exports excavators to Southeast Asia.

In addition, Hangzhou Kobelco will supply fabricated attachment parts and crawler frames for export to Japan and the United States. In building an optimum global production system, some of the production of these excavator parts will be shifted to Hangzhou to increase the cost competitiveness of Kobelco's plants.

Hangzhou Kobelco was formed to meet the growing demand for hydraulic excavators in China. With Kobelco's first joint venture, Chengdu Kobelco Construction Machinery Co., Ltd. in Sichuan Province, Kobelco can flexibly meet demand from inland and coastal regions.

In September 1994, Chengdu Kobelco became the first hydraulic excavator joint venture established by a Japanese company in China. Kobelco Construction Machinery (known at that time as the Construction Machinery Division of Kobe Steel) formed Chengdu Kobelco with the state-run Chengdu Construction Machinery (Group) Co., Ltd. The joint venture grew on the back of the booming Chinese construction machinery market.

The Chinese market for hydraulic excavators has grown sharply in recent years, increasing fivefold since 1999. Based on the number of new machines sold, China has grown into the fourth biggest market after Japan, Europe and the United States. In 2004, demand in each of the four markets was approximately 25,000 units, or over 100,000 units worldwide.

However, macroeconomic controls implemented in spring 2004 by the Chinese government sharply reduced demand for construction machinery. In spring 2005, construction resumed in areas under development that had been temporarily frozen. Signs of recovery are appearing, and the number of excavators sold monthly has been increasing in comparison to the same periods last year. For 2005, Kobelco anticipates demand will be similar to 2004.

The potential demand for construction machinery in China is high owing to numerous large construction projects, including the Beijing Olympics in 2008 and the Shanghai Expo in 2010. In addition to the coast, development of the western region and other interior areas is accelerating.

Milestones
Sept. 1994 Kobe Steel and state-run Chengdu Construction Machinery (Group) Co., Ltd. establish Chengdu Kobelco Machinery.
Aug. 2003 Chengdu Construction Machinery (Group) becomes privatized. Kobelco Construction Machinery establishes and takes equity in holding company Chengdu Kobelco Construction Machinery Group Co., Ltd.
Dec. 2003 Kobelco Construction Machinery, Toyota Tsusho and Chengdu Jialixing Investment establish Hangzhou Kobelco Construction Machinery Co., Ltd.

First excavator produced at Hangzhou Kobelco Construction Machinery
First excavator produced at Hangzhou Kobelco Construction Machinery
 
Background Information
Hangzhou Kobelco Construction Machinery Co., Ltd.
Location: Hangzhou, Zhejiang Province, China.
Capital: US$28.7 million (about 3 billion yen)
Equity share: Kobelco Construction Machinery 51%
Toyota Tsusho 27%
Chengdu Jialixing Investment 22%
Established: December 30, 2003 (Start up in March 2005)
Management: Kazunori Yamashita, Chairman
Akira Kinoshita, President
Business: Manufacture of hydraulic excavators
Production capacity: 2,000 units
Area: 300,000 square meters
Employees: 205 (As of October 2005)

Kobelco Construction Machinery Co., Ltd.
Location: Tokyo, Japan
Capital: 16 billion yen
Equity share: Kobe Steel, Ltd. 80%, CNH Global N.V. 20%
Established: October 1, 1999
President: Hiroo Shimada
Business: Manufacture, sale and servicing of construction machinery
Sales (year ended Mar. 2005): 174.5 billion yen (consolidated)
111.7 billion yen (non-consolidated)
Employees (as of April 2005): 2,800 (consolidated)
600 (non-consolidated)

Chengdu Kobelco Construction Machinery Group Co., Ltd.
Location: Chengdu, Sichuan Province, China
Capital: 56.5 million yuan (about 790 million yen)
Equity share: Management Employee Buy-Out Chinese Group 49%
Chengdu Hua Pheng Industrial Group Investment Co., Ltd. 12%
Kobelco Construction Machinery Co., Ltd. 34%
Toyota Tsusho Corporation 5%
Established: August 12, 2003
Chairman: Wang Jin
Business: Holding company; sales & servicing of excavators & wheel loaders
Employees: 320 (As of September 2005)

Chengdu Kobelco Construction Machinery Co., Ltd.
Location: Chengdu, Sichuan Province, China
Capital: US$12 million (1.4 billion yen)
Equity share: Chengdu Kobelco Construction Machinery Group Co., Ltd. 45%
Kobelco Construction Machinery Co., Ltd. 55%
Established: September 14, 1994
President: Kazunori Yamashita
Business: Manufacture, sales and servicing of hydraulic excavators
Production capacity: 2,000 units
Employees: 470 (As of September 2005)

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