Want to rule on firewood dependence Futian switched to Cummins

In February of this year, during a two-day visit to China, U.S. Secretary of State Kerry visited the Foton Cummins Plant in Changping, Beijing. Among them, a photo of Kerry and a high-power model engine in the Cummins Cummins plant attracted outside attention. This engine is not owned by Futian Cummins' existing products.

The answer was soon revealed. The Economic Observer reporter learned from informed sources that Cummins has reached an agreement with Futian and authorized Futian to produce its large-displacement engine, one of which is the model shown in the photo.

In April this year, Fukuda executives will travel to the United States to sign an agreement with their partner Cummins Inc. The content of the agreement is Cummins authorized Foton Cummins to produce Cummins large displacement engines.

Fukuda insiders also confirmed the above cooperation to reporters and revealed that inside the Fukuda, the new large-displacement engine series plan was named "GEP super power plan." "GEP" refers to the Cummins G-Series engine. According to the data, the G-Series will include two engines, the ISG11 and ISG12, with displacements of 10.5 liters and 11.8 liters, respectively.

After the formal signing, Fukuda will follow the naming conventions of the previous ISF series and name the large-displacement engine "ISG" series. This will also be an important one in the history of Futian. Before this, due to the lack of large-displacement engines, Foton had to purchase Weichai Power (000338) products for a long period of time. The resulting low profit margin has plagued the world's largest commercial vehicle brand.

In fact, Fukuda had previously intended to introduce high-power engines from another partner, Daimler, to complete the layout of large-displacement engines, but Daimler was too conservative in cooperation and the plan has not been able to complete the project. The Mercedes-Benz engine that was initially discussed has also entered the ranks of outdated products.

Although the Fukuda Board of Directors did not directly respond to the cooperation with Cummins, but the personage of the department said, “Fukuda has always lacked a large-displacement engine, whether Daimler’s large-displacement engine or the rumored Cummins, will make Fukuda's profits have been greatly improved."

Fukuda's weakness

From the perspective of sales volume, Foton has become the industry leader with no dispute. In 2013, Futian produced a total of 652,300 vehicles in the year, an increase of 7.57% year-on-year. As of 2012, Foton has been the chief of domestic commercial vehicle companies for nine consecutive years, and won the world championship in commercial vehicle sales twice.

However, the problem of low profit margins has plagued Fukuda. In 2009, Beiqi Foton achieved 600,000 sales in the first year of global commercial vehicle championships, an increase of 47% year-on-year, but the net profit margin was only 2.3%. In the first half of 2013, its net profit rate further fell to 1.25%. The reason is that Fukuda lacks core technologies and is subject to people on some key core components.

“China's heavy truck companies have very weak independent research and development capabilities. Profits of the upstream and downstream industries are far greater than those of vehicle companies. Futian is no exception. The two core components of large-displacement engines and transmissions need to be outsourced, taking over most of the profits. "Industry analysts told reporters.

On large-displacement engines, Foton is mainly purchased from Weichai Power. According to statistics, over 70% of Foton's engines are purchased from Weichai Power in medium- and heavy-duty commercial vehicles.

Fukuda has been in contact with Daimler since 2003 and wants to establish a joint venture with it to obtain the technology of large displacement engines, but it was not until 2010 that the two parties formally established a joint venture company. In 2012, the two parties reached an agreement on the production of engines. However, the specific implementation was dragged on again and again. The original production scheduled for 2014 will be difficult to achieve.

Futian Dong Secretary Office confirmed to reporters that the Foton Daimler engine could not achieve production this year. “The factory building is still under construction and production may be postponed.”

Power Strategy Transformation

The "joyful cooperation" with Cummins indicates that Fukuda has made major changes in its power strategy.

According to Fukuda's original idea, cooperation with Daimler is to strengthen the strength of heavy trucks, and the cooperation with Cummins is to consolidate the status of light trucks.

In 2006, when Foton and Cummins established a joint venture company, Wang Jinyu, General Manager of Foton Motor Co., Ltd., clearly stated that Foton Cummins' engine products will be widely used in light trucks, pickup trucks, SUVs, MPV utility vehicles and small off-road vehicles. Vehicle equipment and other fields to enhance product competitiveness.

Since Foton Cummins mainly produces ISF series 2.8-litre and 3.8-litre light inline four-cylinder high-pressure direct-injection diesel engines, Daimler was the hope of Fukuda's heavy-duty trucks at that time.

However, Daimler has always been conservative in its technical output. "Daimler does not allow Fukuda to really use a Mercedes-Benz engine." A source close to Futian's top told reporters.

From the initial contact with Daimler to the final signing of the agreement has been 9 years, even if Fukuda can put into production Mercedes-Benz OM457 engine on time this year, from the initial negotiation between the parties has already passed 11 years, Daimler engine has also been updated in Europe, this was the original The advanced engine has actually entered the ranks of outdated products.

The cooperation with Daimler has been slow, and Fukuda has to find another partner to quickly get rid of dependence on Weichai for large displacement engines.

The successful cooperation with Cummins made Fukuda see new hope. "The G-Series engine is one of Cummins's most advanced large-displacement engines at present, and this is not only to be realized domestically, but also to be put into operation overseas in the future," said Futian. The overseas markets it has revealed may include Brazil, Russia, India, etc. "Where did Foton go and Cummins would follow?"

Since 2013, Foton Cummins has maintained rapid growth. As of the end of August, it has sold a total of 68,200 engines, realized sales revenue of 1.828 billion yuan and total profit of 155 million yuan.

The good prospects allow both parties to continuously increase their investment in joint ventures and expand their production capacity. At this point, further deepening cooperation with Fukuda is also a matter of course.

"Fukuda and Cummins will be all-round cooperation this time," Fukuda insiders said. This means that Fukuda has completely changed its original vision of relying on Daimler to increase its power, and instead takes the large displacement engine technology required by Cummins. Of course, the price is that Foton will seize the market for Cummins globally.

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