Wärtsilä, John Crane-Lips In Marine Propulsion Deal

Tuesday, June 20, 2000
In a move which firmly signals that marine propulsion power consolidation of resource is far from complete, Wärtsilä NSD and TI Group, on behalf of John Crane-Lips, signed of a co-operation agreement to develop, market and supply total marine propulsion power systems to the shipbuilding industry. Agreement has also been reached for TI Group to purchase Wärtsilä NSD's propeller production and related servicing business at Rubbestadneset, Norway, with approximately 120 employees transferring from Wärtsilä NSD Norway to John Crane-Lips. The co-operation agreement follows the signing of a Letter of Intent in February and is subject to clearance by the appropriate regulatory authorities. Wärtsilä NSD and John Crane-Lips have significant complementary strengths. Wärtsilä NSD has a substantial share of the marine engine market and John Crane-Lips has a leading position in the market for integrated propulsion systems, including propellers, waterjets, thrusters, shaft seals and bearings. Under the brand name, Wärtsilä-Lips, customers will be offered total marine propulsion power systems from a single source, integrating all aspects of propulsion and maneuvering systems from the engine, through the gear box to the ship's propellers and controls. The global commercial shipbuilding market is expected to grow significantly over the next decade. In the face of competitive pressures, environmental regulations and greater complexity in ship design, shipowners and shipbuilders are now seeking to outsource substantial elements of ship construction, including marine propulsion power systems, to suppliers. As technological leaders, Wärtsilä NSD and John Crane-Lips are ideally placed to benefit from this trend towards total systems. By combining the two product ranges, the co-operation agreement will substantially expand the range of propulsion systems offered by Wärtsilä NSD and provide John Crane-Lips with a significant opportunity to increase its sales and to continue to outperform the underlying shipbuilding market. The ability to offer global service and maintenance for any kind of vessel and for all types of products, through the service networks of Wärtsilä NSD and John Crane-Lips in 50 countries, will bring also important benefits to shipowners, over the lifetime of their vessels. Wärtsilä NSD's existing installed base of marine propulsion systems will also be a valuable additional servicing opportunity for John Crane-Lips. Under the co-operation agreement, Wärtsilä NSD, with 560 marine support people worldwide, will act as prime contractor to shipyards for total marine propulsion power systems. It will provide diesel engine based prime movers and gearboxes while John Crane-Lips will supply on-board propulsion and sealing systems. Using innovative and advanced technology, the co-operation agreement addresses the entire commercial marine market, from fishing vessels and tug boats to cruise ships and VLCC's, as well as defense markets, and should provide significant growth opportunities for both companies. Both Wärtsilä NSD and John Crane-Lips retain the right to market their own product ranges independently where customers to not wish to purchase total marine power systems. Ole Johansson, President and Chief Executive Officer of Wärtsilä NSD, said: "This agreement is an important milestone for Wärtsilä NSD in developing our position as The Ship Power Supplier. The requirement for integrated solutions is increasing within the industry and Wärtsilä NSD is well placed to respond to that need." John Cousins, Chief Executive Officer, John Crane-Lips commented: "Through the Wärtsilä-Lips co-operation agreement, we will have greatly enhanced access to a growing market and an opportunity to significantly increase sales of propulsion systems. Since our announcement in February, the shipbuilding market has shown considerable interest in the concept of total marine power systems, and prospects for converting recent enquiries into new orders are very encouraging."

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