Kobe Steel plans to start merger of construction equipment companies

Kobe Steel Ltd, the 5th largest steel producer in Japan and 15th in the world, announces the reorganization of its subsidiaries. Kobelco Construction Machinery Co., Ltd. and Kobelco Cranes, Ltd. agreed to begin consideration of a business combination with the aim of integrating the two companies from April 1, 2016.

Currently, both construction equipment companies, including hydraulic excavators and cranes, operate as part of the Kobe steel group. To capture the growing demand in the global market, Kobelco (Construction Machinery) and Kobelco (Cranes) are pursuing their respective strategies and plans for global expansion, while both companies continue to grow.

Construction machinery is an important segment with a 20 percent share in the consolidated sales of the Kobe steel group, which focuses on high value-added products up to computer components and bioengineering. The company specializes in ferrous metallurgy products and is considered the Japanese leader in the production of welding electrodes and titanium products, as well as a strong competitor in the rolled aluminum and copper market.

In the mid-term business plan from fiscal 2013 to fiscal 2015, Kobe Steel Group stated that it intends to pursue a policy of strategically expanding its machine business in the international market. In the United States, where demand continues to be strong, Kobelco Construction Machinery is actively pursuing development, deciding in late 2014 to build an excavator plant in the country. In addition, it plans to establish a presence in India, the Middle East and other developing countries and regions where demand is expected to grow.

Kobe Steel Group intends to expand cooperation between the two companies to improve business efficiency, from development, procurement and production to sales. The group has previously considered ways to further enhance its global development capabilities in emerging markets and has decided to seriously consider a merger between the two construction equipment companies.

Through the business alliance, excavator and crane firms will benefit from operational efficiencies that will further strengthen their business foundations. In addition, the merger is expected to boost global excavator and crane sales, furthering the expansion of the KOBELCO brand, as well as increasing the businesses' contribution to the Kobe Steel Group.