October 2, 2000
Ms. Agueldo de Aquinaldo
Chair, The Spain-US Chamber of Commerce
21 Via de Roma
Madrid E-23
Spain

SUBJECT : Results of the Meeting on the Establishment of a Joint Venture

Dear Ms. Agueldo de Aquinaldo,

It is my pleasure to inform you of the results of the meeting on the establishment of a joint venture between Casa Caravans and Venture Homes. I hope that the following will help you understand those consequences of the meeting and form a favorable attitude toward the joint venture.

The main objective of the meeting has been on setting up a joint venture between the two companies. And also, the form and identity of leadership and the amount and form of investment by each company have been discussed, after having decided to establish a joint venture. Through negotiations among participants who have different interests, we have found a common interest on the joint venture. Now the members of the meeting all appear to have reached quite a satisfactory agreement.

Some background information will help you understand how such an agreement has come about. Basically, both Casa Caravans and Venture Homes were considering whether the joint venture would be profitable for the two companies. Casa Caravans, as a recent market report showed, has been poor at exports to European markets, which made them consider seriously the need for capital investment, but above all, a new image. Due to the continuing decline in the profits from exports, Casa Caravans doesn't have much capital to invest. Meanwhile, Venture Homes, successful manufacturers of luxury mobile homes, was planning to enter the European market and was looking for a suitable partner with experience in European markets and European-friendly brand image. As you can see here, through a joint venture, Casa Caravans can get capital investment and a new image while Venture Homes can get European market experiences.

The most fruitful results of the negotiation was the decision on doing a joint venture with the name of "Casa Ventures", of course, including the agreements on form and amount of investment and leadership structure. In the beginning, about $60m was a rough estimate of the cost for the inception of the new business. Each company will contribute a half of it, $30m. Casa Caravans will provide $15m in capital, $10m in land and facilities, and $5m in logistics whereas Venture Homes will invest $30m in the form of capital. In addition to the contribution, Venture Homes has assented to provide the cost for the new European-wide market survey. After the discussion about the investment, both parties have formed a leadership structure, composed of the president, head of operations, and the board of directors. Head of operations, having a responsibility of coordinating the whole management, will be a Spanish because he would understand the local conditions better than his American counterpart. For a balance of authority, an American will take the position of president. Similarly, the board of directors will be made up of three American directors, each from finance, production, and training departments, and the same number of Spanish ones from marketing, sales, and personnel departments. Mobile Homes will mainly deal with production-related tasks under consideration of its technological advantages and Casa Caravans will take up marketing-related ones, which require an understanding of European mentality in dealing with European consumers and employees.

I firmly believe above agreements are quite pleasurable and reasonable. Both companies have benefits from reducing the whole cost by doing the joint venture. Mobile Homes can reduce as much as $30m in opening up a business in Europe, while Casa Caravans can do a market survey and obtain a technology for a new design and image with less money, which would not be affordable if not the joint venture. Of course, I do not deny that further detailed discussions are needed, especially on the kinds of model to produce, the allocation of the finances, and the way of conducting the market survey.

Now I'd like to make a recommendation that you provide helpful informations such as legal procedures for registration, name and position of the contact person, and so on. In addition, you might tell the U.S. and Spanish governments to lessen domestic restrictions in establishing a company, if you have a favorable attitude to this joint venture.

I hope that you have a clear understanding about the meeting. And I'd like to express my gratitude for your dedication to promoting trade and investment between Spain and the US. If you have any questions or suggestions about the joint venture, please don't hesitate to ask me.

Sincerely,

Hwa-kyong Seo
Public Information Officer
Casa/Ventura Joint Venture Deliberation Committee