Auto-glass maker invests $200 million

Incentives used to entice Fuyao into the deal but no details were given

An agreement by Chinese auto-glass maker Fuyao Group Co to invest $200 million to establish a manufacturing operation in Ohio will open the floodgates for more US-China manufacturing deals, the leader of the Chinese legal team said.

"We will see more Chinese companies set up manufacturing facilities in the US," Shusheng Wang, senior principal with the Michigan law firm of Miller Canfield, told China Daily.

In what would be the largest investment by a Chinese company in the Midwestern state, Fuyao's North American subsidiary agreed to acquire more than 1 million square feet in Moraine, a southwestern Ohio city near Cincinnati. The acquisition, expected to close in the spring, would include a General Motors Co vehicle-assembly plant which closed in December 2008, about six months before the then-troubled US auto maker entered Chapter 11 bankruptcy protection, according to a statement from the Ohio governor's office.

The investment would create at least 800 jobs over five years, starting in late 2015, the state said. The job categories to be filled would include production, management, engineers, quality control, forklift operators and maintenance and repair.

The state said it used incentives to entice Fuyao to make the deal, but released no details about the package.

Wang called the agreement - which awaits the completion of Fuyao's due diligence research - "very exciting", saying it will boost Ohio's economy while acting as a beacon for Chinese companies considering moving manufacturing operations to the US.

"For years, people criticized the Chinese because they believed they were taking away the (US) manufacturers," the lawyer said. "Now the jobs are coming back."

That the deal takes the form of an investment rather than an acquisition shows how China is moving forward to become a player in the global automotive market. In recent years, Chinese companies have used acquisitions, rather than investment, to make inroads in the global supply industry. The transaction that showed China was serious about becoming a major auto-parts supplier was the 2010 acquisition of Nexteer Automotive by China's Pacific Century Automotive Systems. The $450 million transaction stands as the largest Chinese takeover of a US supplier in automobile history.

On that note, in a statement provided by the state, Mark O'Connell, CEO of foreign investment firm OCO Global, noted that a $200 million investment "from anywhere in these uncertain times is an achievement, but from China, where investors favor acquisitions rather than new investment, is very impressive".

Fuyao, China's biggest auto glass maker, has been in the US since 2003.

Its familiarity with US business practices made it easier to complete the transaction, said Wang, who also led the legal team that handled the landmark Nexteer purchase.

"Fuyao has been here many years and are doing very well," he said. "They are ready to do this. A lot of Chinese companies are not ready. Although they have money and they have motivation, they are not familiar with how you do things over here. It is very difficult to work with those companies. That's why we have to work very hard to educate them."

A US manufacturing location appeals to companies such as Fuyao, a major supplier to GM and other automakers. "If you want to be a global supplier, you need to be anyplace the OEM (original equipment manufacturer) is located," Wang said. "That's an important factor for the Chinese companies to set up plants over here."

China is "still cheaper, but considering the (costs of) materials, the shipping, logistics, everything - there is not that much advantage to manufacturing all the products in China," he said.

With more than 18,000 employees worldwide, Fuyao, based in Fuzhou, Fujian province, also has locations in Germany, Russia Japan, South Korea, Australia and Brazil.

The Ohio plan is part of a plan by the Chinese company to spend an overall $420 million setting up subsidiaries in the US and Russia, the Dayton Daily News reported. Fuyao's aim is to produce 3 million sets of auto safety glass per year from the Ohio facility, according to the newspaper.

In a statement provided by the state, Fuyao Chairman Cao Dewang said: "We appreciate Ohio's strategic location, workforce and pro-business environment in making this decision to open our North American facility. We are making such an investment in Moraine to better service our important OEM customers in the United States and North America."

michaelbarris@chinadailyusa.com