Doosan Infracore is internally considering shutting down its plant in China. Due to the slump in China’s construction industry, more and more Korean firms that have entered the Chinese market are expected to withdraw from the country.
According to construction equipment industry sources and Doosan Infracore on Aug. 19, Doosan Infracore is giving careful consideration to shutting down the plant in Yantai, its machine tool division in China, as well as its overall business reorganization, considering the decreasing rate of operation in China’s plants.
A senior official from Doosan Infracore said, “Since the construction business is slowing down, the company is readjusting the overall business structure in China. The shutdown of the plant in Yantai is included in the process, but we have not decided the exact time yet.” However, Doosan Infracore is expected to scramble to do so if possible, as the operation rate keeps decreasing.
Doosan Infracore’s Yantai plant, which is in charge of the machine tool business, entered the Chinese market in 2003 with starting capital of 10.5 billion won (US$8.88 million). It once played a role as the new growth power of the company, but its operation rate decreased to 50 percent from 2012. Eventually, it posted 1.6 billion won (US$1.35 million) and 1 billion won (US$845,666) in losses in 2012 and 2014, respectively. At the end of 2013, Doosan Infracore carried out the first business reshuffle, switching over its Chinese corporate Suzhou plant to a warehouse. However, only production capacity has improved, while both actual output and operation rates are on the decrease.
Industry sources think that the shutdown of the Yantai plant is predicted, since products manufactured in Korea and China are not much different. Chinese-made products have price competitiveness, but there are no big differences in terms of quality.
In addition to the closedown of the Yantai plant, Doosan Infracore will come up with measures to reorganize its Chinese business. This is largely due to the mounting sense of crisis to the extent that the Chinese government recently devalued the yuan in order to stimulate the economy, though the Chinese construction market was expected to pick up from this year. Doosan Infracore once posted 4 trillion won (US$3.38 billion) in net profits in China. However, the figure plunged to 1 trillion won (US$845.67 million) in 2012 and dropped further to 800 billion won (US$676.53 million) last year. This is why the company needs to reshuffle its business in China.