Tognum invests heavily in production

12 Aug 2008

The Friedrichshafen-based Tognum Group continues its expansion trend. The company decided to invest an additional ?75 million in capacity expansion in the production of MTU engines, L?Orange high performance injection systems, as well as the extension of the MTU Onsite Energy power generation systems during the current and the coming year.

Particularly the in-house production of essential components for high performance diesel engines will be expanded and given a more international outlook with an investment volume of around ?50 million. The Tognum Group is therefore currently looking for a new site in the US dollar region which would initially supply the existing assembly plant in Detroit (Michigan, USA) with cylinder heads and components for the production of the successful Series 4000 engines.

Furthermore, at the existing site near Istanbul (Turkey), the first step will be to set up a manufacturing facility for cylinder liners designed for the Series 4000. Simultaneously with the installation of new international manufacturing sites in the US and Turkey, an amount of more than ?10 million will be invested at the existing production site in Friedrichshafen in order to boost quantities in conrod and crankcase production facilities.

Volker Heuer, CEO of Tognum AG explains: "With these major investment efforts for the future, we will further increase the flexibility in our engine production and will be able to further grow revenues from 2010 onwards." The new US site, in combination with a purchasing offensive in the dollar region, is designed to have sustained calming effects on the currency volatility currently affecting Tognum. "Moreover, in the long term, we are enhancing our competitiveness, and the production on site will improve our chances to be awarded major orders with public authorities", comments Heuer on the confirmation of the Executive Board?s plans by the Supervisory Board.

The Tognum Group continues to see strong sales potential for its broad product portfolio, which is available to 22 different customer groups in a wide variety of regions. The Supervisory Board, which had received detailed information on the planned reorganization from the Executive Board in its previous two meetings, approved the continuation of negotiations with the shortlisted US sites and the conclusion of an agreement with the best of those sites. Board member Dr. Gerd-Michael Wolters, who is responsible for Technology & Operations, comments: "The US has a keen interest in the production of high quality engines in their country. We will be able to start parts production as early as late 2009." Plans are currently focusing on securing suitable premises by the third quarter of 2008 that comes with the ideal infrastructure in terms of transportation, energy and labour whilst at the same time offering long-term options for expansion. "Regardless of the global expansion in production, we will continue to step up our efforts regarding our new production logistics facility in Friedrichshafen. Also, as planned, we will start assembly operations for our Series 1600 during the fall of 2009 at Lake Constance", Dr. Wolters explains the overall schedule.

The development of a new engine production site in the US is another consistent step in the implementation strategy of the Tognum Group, which was initiated in 2005. Besides the assembly plants in Friedrichshafen (Lake Constance/Germany) and Detroit (Michigan/USA), MTU also has an assembly facility in Suzhou/China for Series 2000 engines, and has started a local Joint Venture in China targeted at the assembly of Series 4000 engines.

Apart from the expansion in the engine business, Tognum Group is currently investing around ?10 million as planned in the "MTU Onsite Energy" sites Mankato (Minnesota/USA), Augsburg and Ottobrunn near Munich (both in Germany): these investments are targeted at the expansion of the production capacities for diesel, gas and fuel cell based onsite power generation systems. Another element is the growing component business of Tognum subsidiary L?Orange GmbH in Glatten (Germany/Black Forest area), which is currently expanding their production capacities for high pressure injection systems with an investment volume of ?16 million.

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