Shanghai Diesel Engine's 45 per cent owned joint venture with Caterpillar of the United States made losses of 31.7 million yuan (about HK$29.42 million) last year, analysts were told yesterday. Analysts said after a meeting with the company's management it appeared the two partners were divided on how the business should be run. One Shanghai analyst said: 'Diesel Engine is concerned about the earnings the joint venture could provide in the next couple of years and so is striving to cut losses in every possible way.' Stringent cost controls, sales promotion and the introduction of China-made components have been proposed by Diesel Engine to achieve a turnaround in business. The 3300B-Series engine that the joint venture makes uses imported components from Caterpillar. 'Attempts by Diesel Engine to boost sales and control cost by bringing in China-made components have met resistance from Caterpillar,' the analyst said. Diesel Engine is in talks with Caterpillar to seek measures to trim losses. Caterpillar has the final say on the venture, from purchasing to operations and sales. 'Caterpillar, however, doesn't bother much about the losses as it is in China for the long term,' the analyst said. 'The joint venture could just be a means for it to get into the China market.' Last year, 164 3300B-Series engines were made and sold at 120,000 yuan (about 111,360) per unit. The company's popular 135-Series engines, which hold a 74 per cent market share, are sold for 40,000 yuan each. Analysts were surprised to learn the losses made in the joint venture last year resulted from its inability to tap economies of scale. They had believed soaring production costs and sluggish sales were to blame. Analysts are, however, optimistic about Diesel Engine's earnings this year, having been told by the firm that state-owned companies would now have more money this year to buy capital equipment. 'Once cash-strapped customers have come back for engines with more money in their pockets,' the analyst said.
