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Hitachi divests half of stake in Hitachi Construction Machinery

Hitachi divests half of stake in Hitachi Construction Machinery
Photo courtesy of Hitachi Construction Machinery

Construction machinery manufacturer Hitachi Construction Machinery Co., Ltd., headquartered in Tokyo, Japan, announced that parent Hitachi Ltd. has decided to sell about half its 51% stake in the company for JPY200 billion (USD1.7 billion) to Japanese trading house Itochu and investment fund Japan Industrial Partners.

Among Hitachi Construction Machinery’s activities is the development of automated construction machinery that uses the group’s Internet of Things platform, Lumada. 

The sale will represent a final tranche of Hitachi’s decade-long business portfolio overhaul.

In August 2021, Hitachi Construction Machinery agreed with Deere & Company, based in Moline, Illinois,  U.S.A., to dissolve their joint venture relationship in North, Central and South America. 

Following the announcement, the company received a series of inquiries from trading companies and large-scale  distributors relating to mining to small- and medium-sized distributors mainly relating to construction in the Americas. Currently, the company is steadily developing its sales and  service network pursuant to new contracts. 

In October, the company renamed Hitachi Construction Machinery Loaders America, Inc., headquartered in Newnan, Georgia, U.S.A., the company’s U.S.-based consolidated  subsidiary in charge of manufacturing and sales of Hitachi-branded wheel loaders in North America, making it the headquarters in the Americas. The new company name is Hitachi  Construction Machinery Americas Inc. 

Hitachi Construction Machinery Americas Inc. is  strengthening its structure with a focus on the sales and service sectors, as the regional  headquarters handling all Hitachi Construction Machinery products, including wheel loaders, which have been continuously traded, compact and construction-sized hydraulic excavators, ultra-large mining excavators, and mining dump trucks.  

Currently, Hitachi Construction Machinery Americas Inc. has generally agreed with 16 sales  dealers which cover mid-to-wide areas in the Americas to commence new transactions, and a  sales structure that covers most areas of the America markets is expected to be put in place. Existing distributors of wheel loaders, transactions with whom have previously continued, are  also preparing for the expansion of Hitachi-branded products, which will start in March, in order to expand their lineups of compact and construction-sized hydraulic excavators. In the mining business, active business negotiations are expected to be held in the North, Central and South  American markets through collaboration with group companies engaged in mining-related  business in the Americas. 

In order to oversee these developments, Sonosuke Ishii, senior vice president and executive  officer, president of Mining Group of the company, has also served as general manager of America Business Division of the company and chairman of the Board of Hitachi Construction  Machinery Americas Inc. since October, and the company established the Americas Business  Expansion Support Office and has promoted the strengthening of the structure for supporting the North, Central and South America business through the company’s group. In November,  the first Hitachi-branded construction-size hydraulic excavator was shipped from Japan to North America. 

Amid such serious challenges, the company has decided to accept the capital participation by Japan Industrial Partners and Itochu. 

Itochu has formed business relationships in the construction machinery business with the company in the areas of export trade finance projects and business operations of a joint venture established with the company, and other various business relationships with the company. In particular, Itochu and the company have been operating a joint venture in the  fields of manufacture, sales and finance in Indonesia for the past 30 years.

Itochu has  distribution networks including land and sea transportation spanning between Japan and the  United States, and warehouses and logistics and materials centers in North America, and a  customer network of construction machinery rental companies in the United States that has  been established by a manufacturing and sales company specializing in small-sized  construction machinery and an on-line construction machinery rental company. 

In addition,  Itochu and its group companies each own companies providing finance services in the United States. The company will extensively consider collaboration in finance business with Itochu group in North America in financing arranged for both sales agents and retailers. In this way, through the new capital relationship with the partners, the company will further solidify its business development in the North America market, the world’s largest market. At  the same time, the company will continue to collaborate with existing business partners around the world, including those in the South America market, to accelerate its global growth strategy. 

As a result of this agreement, the company will cease to be a consolidated subsidiary of Hitachi and will turn into an equity method affiliate; however, the company’s strategy to expand its components and service business, widely recognized as a part of the Lumada business, on which the Hitachi group focuses, remains unchanged after the removal from the scope of consolidation of Hitachi. 

The company’s group will continue to display the Hitachi brand, collaborate with Hitachi and the Hitachi group in various fields of R&D, including the internet of things (IoT), and contribute to the enhancement of  the value of the Hitachi brand, as well as procure certain parts and components from the Hitachi group, mainly in the mining business. 

In addition, the company will globally contribute to realizing net zero emissions in the mining market as a member of the Hitachi group, by providing engineless full electric dump trucks, which are jointly under development with ABB Ltd, based in Zurich, Switzerland. In this way, the company will continue collaboration with Hitachi and the Hitachi group in various fields of R&D, including IoT, and contribute to the  enhancement of the value of the Hitachi brand.