O&K finds good home with New Holland - Orenstein and Koppel acquired by New Holland

Diesel Progress North American Edition, March, 1999 by Jonathan Walker

Acquisition adds O&K products to New Holland, Fiat-Hitachi ranges; implications for powertrain products and engine alliance

Many were expecting the next big move in mobile equipment to be a large construction OEM establishing itself in the agricultural sector, but the opposite happened late last year. Subject to cartel authority approval, German construction equipment manufacturer Orenstein & Koppel (O&K) was acquired by New Holland which, although already a multimarket OEM, was biggest and best known in tractors and harvesters.

And there are two further surprising aspects to this deal: New Holland is European, part of a large Italian group to be precise. Thus, this acquisition is against the general tide of U.S. takeovers of European companies and, according to declarations of intent, weren't we all expecting a Scandinavian car, truck and bus and construction OEM to make expansive moves in O&K's sector?

As a result, the effects of this takeover are twofold at the corporate level: New Holland is now firmly positioned in an exclusive group of globally active, multimarket mobile equipment OEMs with annual sales of around $2 billion per sector - $5 billion in agricultural equipment and around $1.3 billion per year in construction, to which O&K adds around a half billion - plus the Italian Fiat group, which owns 69 percent of New Holland, adds world player status in the construction sector to its existing global heavyweight standing in cars, truck and buses and agricultural machinery.

Before this move, New Holland's construction sector interests centered on backhoe loaders, skid-steer loaders and telehandlers from its Industrial Equipment program, along with ranges of excavators, wheel loaders, crawler dozers and graders from Fiat-Hitachi, a joint venture with Hitachi Construction Machinery Co. Ltd., Sumitomo Corp., Hitachi Construction Equipment machinery B. V. and Toyo Umpanki Co., in which New Holland has a 57 percent share. To this constellation, O&K brings wheeled and crawler excavators, wheel loaders, and graders. Significantly this combined offering covers the full gamut of heavy-, medium-, compact- and miniconstruction equipment.

The compatibility of the ranges is perhaps best demonstrated by the fact that in the months prior to the takeover, New Holland and O&K signed a marketing agreement under which Hew Holland would offer O&K excavators in North and Latin America. Only a few months ago, O&K commenced production of wheel loaders for distribution in Europe by Fiat-Hitachi. A look at the data of the remaining parts of product ranges also confirms this good fit, with apparent overpopulation in mini- and compact-excavators attributable to O&K's outsourcing of these products.

In any case, with several acquisitions in the agricultural sector behind them, both New Holland and Fiat have proven records of welding separate product ranges into a single, rational whole.

Geographically, also, New Holland and O&K's activities are complementary, as New Holland CEO Umberto Quadrino pointed out. "The O&K product line will significantly enhance our presence in North and South America," he said. "This will complement Fiat-Hitachi's success across the markets of Europe, Africa and the Middle East, where we continue to invest in the complete renewal of the Fiat-Hitachi product line in conjunction with our partner, Hitachi Construction Machinery Co., Ltd."

The addition of the O&K product line also comes at an opportune time for the group's newly formed North American Construction Division, which came into being in November. The new division will introduce a full line of O&K hydraulic excavators in North America during 1999, New Holland stated. Elsewhere, O&K will supply New Holland Construction with hydrostatic wheel loaders, while in Latin America, New Holland will sell O&K hydraulic excavators under the Fiat-Allis brand name in selected markets.

From an O&K standpoint, this prospective business detailed above will give a substantial boost to production at O&K's works in Berlin and assist a rapid return to profitability. Overall, joining the rapidly expanding New Holland group is a very positive outcome to a long period of uncertainty at this well-respected construction OEM.

According to New Holland's plans for O&K, the company will maintain its own distribution network, will continue to market its product line under the O&K brand name and will have its organization strengthened via a rapid expansion of its research and development activity.

Interestingly, the basic compatibility of product ranges at O&K and New Holland is also reflected at subsidiary level. Both operate powertrain component sales organizations. At New Holland, New Holland Power Components offers virtually any component used in New Holland equipment, with a strong emphasis on axles from its own plant in Antwerp, Belgium, and complete "powerskids" consisting of engine, transmission, axle and subframe, as used in New Holland tractors and backhoe loaders. At O&K, on the other hand, the O&K Antriebstechnik subsidiary based in Hattingen, Germany, is a leading supplier of hydrostatic planetary gear wheel and track drives, slew drives and axles for excavators, wheel loaders and graders.