The Biggest Headache Was Bank Loans

In just over three years Putzmeister’s world, fashioned around the unforgiving business of concrete, came crashing down around it. For nearly half a century the Stuttgart-based company along with Schwing, its German arch rival, had dominated the niche business of concrete pumps. Until around 2002, each company had been responsible for about 45 per cent of the world market in these machines, a vital tool used on large construction sites. In 2008, Putzmeister announced record sales for the previous year of bn, recording profits before interest and tax of 30m. By this time the business, set up in 1959 by its idiosyncratic founder Karl Schlecht, remained the world market leader in concrete pumps with a market share in 2007 of about 35 per cent. Mr Schlecht, known for handing out to new employees rules based on his version of the Ten Commandments, remained a guiding force in spite of having put Putzmeister under the control of a family foundation. But, after recording in 2009 a 40m loss and losing half its revenues as a result of the financial crisis and recession, the company was forced by the end of last year to put itself up for sale. The biggest headache was bank loans, which at the worst of the crisis were 80m, much of which was owed to Deutsche Bank and Commerzbank. Norbert Scheuch, an industry veteran called in by the banks in 2009 to take over as Putzmeister’s chief executive, toured China for five days just before Christmas to check on putative buyers. The company that emerged as easily the most serious bidder was Sany Group, a fast-growing Chinese construction equipment business started in 1986 by four Chinese engineers. After a series of brief discussions, Sany agreed to acquire Putzmeister for 25m. Speaking at Sany’s headquarters in Changsha, southern China, Sany’s president and co-founder Tang Xiuguo said that he and other top managers agreed the deal without visiting Putzmeister’s main plant and headquarters in Aichtal, south of Stuttgart. “We felt we already knew Putzmeister. They had been our teacher for many years, ” he said. Since its foundation as a producer of welding materials, Sany has expanded aggressively. It started building concrete pumps modelled on the versions made by Putzmeister and Schwing in the early 1990s and then moved into other more mainstream areas of construction machines such as excavators and cranes. David Phillips, managing director of Off-Highway Research, a London consultancy, said Sany was the Chinese construction equipment company that was “most feared” as a competitor by big global businesses in this field such Caterpillar of the US and Japan’s Komatsu. Behind this, said Mr Phillips, was Sany’s “devotion to quality, its enormous manufacturing capabilities and a sophisticated financing division [in which the company offers credit to customers on relatively easy terms]”. Liang Wengen, one of Sany’s founders and the company’s chairman is, according to Forbes magazine, China’s second-richest man with a fortune put at $8.1bn. The company listed its main subsidiary on the Shanghai stock exchange in 2003, though with the founders retaining control of the overall business. Behind Sany’s rapid growth has been the massive expansion in construction activity in China in the past five years that has meant the world centre for building machines has shifted to this country. Putzmeister tried to grab a share of this Chinese business by establishing a factory and sales operation in Shanghai, but failed to make much headway against its China competitors. Last year Putzmeister had a market share in concrete pumps in China of just 2 per cent. Last year Sany made 90 per cent of its Rmb80bn (about $13bn) sales in its home country. Of its 65, 000 employees, all but 3, 000 of them are in China. Source: FT