Jungheinrich will establish a design centre in the US.

There has been some criticism of the alliance between Mitsubishi Caterpillar Forklift America Inc (MCFA) and Jungheinrich AG reported last week (Forkliftaction.com News #423).

Currently, Jungheinrich AG direct-sales subsidiary Jungheinrich Lift Truck Corp has 57 North American dealers for Jungheinrich class 1, 2 and 3 electric-powered forklifts, but, once new arrangements take effect in January, "Jungheinrich will no longer distribute products through facilities in the North American market", says John Sneddon, subsidiary president. "MCFA will be the exclusive distributor of Jungheinrich products in North America, including all sales and service activities."

Some industry observers and participants believe the distribution agreement poses an efficacious challenge to, and constitutes abuse of, Jungheinrich's existing North American dealerships-particularly those lacking MCFA connections.

The distribution changes should boost awareness in North America of the Jungheinrich brand and result in the Jungheinrich products reaching the market more efficiently through MCFA's strong dealer network, but, simultaneously, the upcoming MCFA-Jungheinrich arrangements raise questions about whether any cast-aside Jungheinrich dealers might file legal challenges, objecting to termination of contracts under relevant state franchise laws.

"MCFA and Jungheinrich will continue to operate as two separate entities," Sneddon says. "Jungheinrich will establish a design centre on MCFA's Houston campus (under a lease). The centre will focus on the development of a new range of warehouse products designed for, and manufactured in, North America. The centre will also be staffed with Jungheinrich personnel, with plans to add engineering jobs in late 2009."

Under a production agreement, MCFA's Houston facility will manufacture new lines of Jungheinrich-branded products developed through the Jungheinrich design centre for the North American market.

Until now, Jungheinrich Lift Truck imported forklifts from Europe and, in the marketplace, suffered the financial disadvantages of a long-distance supply chain. During 2008, Jungheinrich sold about 1,900 forklifts in North America - or about 1.2% of the market.

In Richmond, Virginia, Jungheinrich established the subsidiary's North American headquarters in 2000 and, during 2006, took occupancy under a fixed-term lease of a 17,000 sqft (1,530 sm) facility for both the headquarters and a parts distribution center.

Sneddon notes that the Jungheinrich staff in Richmond consists of 57 employees including many on assignment from Europe. "Those persons are expected to return to Europe to take on other positions with Jungheinrich's global operations," he says. "MCFA has extended offers to Jungheinrich employees to take new positions in Houston. That is all the information available to share at this time, but further details may be provided through the initial transition phase."

Jungheinrich has discontinued the operation of previously existing North American stock holding sites in Richmond; Cincinnati, Ohio; Elk Grove Village, Illinois; and Fresno, California.

Following the closure of the Richmond facility on 31 December, Sneddon expects to assume a new position within the Hamburg, German Jungheinrich AG organisation.

Tokyo-based Mitsubishi Group's industrial manufacturing and trading units and an industrial subsidiary of Caterpillar Inc of Peoria, Illinois pooled their technological and financial resources and established MCFA in 1992. The joint venture's plant manufactures Mitsubishi and Caterpillar forklifts in Houston and distributes equipment using a "Two Brands. One Promise" marketing strategy. In 2008, MCFA accounted for about 10% of sales in the North American forklift market.

MCFA says the Cat forklift product line will focus now on sit-down class 1, 4 and 5 counterbalance products and the Jungheinrich line on narrow-aisle class 2 and 3 products, and some class 1 models typically used in warehousing and distribution applications in North America. MCFA says no change is contemplated for the Mitsubishi-brand forklift line offered through North American dealers.