US firm in big Shanghai move

ALLIEDSIGNAL Inc - a company in the top 40 of Fortune 500 - is to build up one of its largest overseas production bases in China over the next two years.

The aerospace, car and engineered materials maker has just set up a US$27 million turbocharger manufacturing plant in Pudong and will spend at least another $100 million on eight or nine projects in the next two years.

AlliedSignal China head Brent Lok said: 'Now we'rediscussing 20 projects and we hope to succeed in at least half of them.' Four or five projects were expected to be confirmed by the end of the year.

The Chinese parties AlliedSignal is negotiating with include Dong Feng Motor Corp, Guangzhou Auto Industry Office, China Eastern Airlines and China Research Institute of Aero Accessories.

As its presence in China grows, the company plans to set up a holding company in Shanghai.

'The holding company will not only co-ordinate our activities but will also be a training and research and development centre,' Mr Lok said.

When the plans are put into effect, China would emerge as the second largest manufacturing base for the company outside the United States.

In France, its biggest overseas base, AlliedSignal has established a dozen plants which accounted for up to $1.4 billion of its global turnover of about $13 billion.

China was projected to provide $500 million worth of sales in about four years, according to Joseph Bastian, vice-president of finance for international operations.

Asked if AlliedSignal was over-exposing itself with its ambitious plan, Mr Bastian said: 'Right now, we're worried about not putting enough eggs here.

'Risks? There'll always be risks in any ventures you do.' He said the China plans tied in with the company's growth strategy of focusing on Asia, which had risen in its international priorities.

To underline the importance of Asia, AlliedSignal moved its international headquarters from its home base, New Jersey, to Hong Kong in late 1993.

The company's first China venture in Pudong has been producing turbochargers since January at a temporary facility.

In September, it will move into its own 8,000 square metre plant in Zhangjiang Hi-Tech Industrial Development Park.

It will initially turn out 20,000 turbochargers annually under AlliedSignal's Garrett brand name for diesel trucks, vans and heavy machinery. Mr Lok said, in line with China's policy, the plant would source more parts and components from the domestic market so that local content would rise to 90 per cent in three to five years.

AlliedSignal Turbocharging Shanghai - which manages the Pudong plant - expects to start exporting some products to Japan, South Korea and Europe next year.

That would only account for a third of its sales, as the growing Chinese market would take up the lion's share. The American company posted sales of $12.8 billion last year.

About 38 per cent came from its car-related operations, 36 per cent from the aerospace segment, and the remaining 26 per cent from sales of engineered materials.

Based in New Jersey, AlliedSignal employs 87,500 in 40 countries.