October 4, 2000
Mr. Aguelo de Aquinaldo, Chair
The Spain-US Chamber of Commerce
21 Via de Roma
Madrid E-23
Spain
Subject: Meetings between Casa Caravans and Venture Homes
Dear Mr. Auqinaldo:
It was good to talk with you over the phone the other day and I was especially grateful for the encouragement and concern that you gave. You asked me to keep you informed on how our meetings are progressing, and I hope you find that the following report meets your needs.
Our meetings between Casa and Venture started with this very simple question, "Do we agree to make a joint venture or not?" And in the case of agreeing to do it, we had three points to be discussed above all in meetings. First, what is the nature of the new company? Second, what are the form and identity of leadership? Third, what are the amount and form of investment by each company?
Some background information on meetings will help you understand more clearly why we needed to make the joint venture. Nowadays, Casa is facing difficulties and is in need of capital investment and a new image; hence, they thought that they could solve these problems by making the joint venture with Venture Homes which is a big and rich company enough to help them. And as for Venture, it was planning to enter the European market and was looking for a suitable partner. So they felt that it would be good to make the joint venture with Casa because they could use Casa's recognition in European market and use Casa's dealer network in Europe.
We basically agreed to do the joint venture, so we could easily reach specific agreements too. Both of us felt that it would be better to become partners than competitors, so there was no objection to make the joint venture and then we came to agreements on three items needed to be discussed first, as follows.
Nature of New Company
We are going to make a new company with the brand name of 'Casa Venture' and
build new facilities to produce mobile homes in Spain.
Form and Identity of Leadership
Upper positions, in which people have more powerful right of decision, such
as the president and CEO will be from Spain, the head of operation will be from
U.S. because Casa was worried about merger or even inquisition which might happen
in the future if Venture occupy upper positions.
Investment by Each Company
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1. |
Amount of investment in the first stage of joint venture:- $10,040,000. Venture will pay $10,000,000 for new facilities and the market survey to figure out demand for Caravans and Mobiles in the European market. |
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2. |
Casa will pay $40,000 for the market survey. |
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3. |
Casa will pay for recruiting new workers and we can output the figure of them after the market survey. |
Additional Points
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1. |
Tentative Price Ranges and Numbers of Models: |
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Caravan- 3 models: $25,000~ 45,000 |
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Mobiles- 5 models: $55,000~100,000 |
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2. |
Transmit advanced technologies and designs of Venture to Casa |
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For Caravans: Spanish technicians and designers will join the technique and design department of Venture in the US and learn their advanced technologies and designs to improve Caravan’s image and performance. |
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For Mobile Homes: American technicians and designers will come to Spain to teach workers how to produce mobiles. |
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3. |
Distribution of Profits: Each company will share equally in the profits. |
Our assessment of the agreement is that we have reached a mutually acceptable agreement. Basically, Casa can change its damaged image by improving designs of Caravans, and can solve the financial crisis by getting supports of capital investment from Venture. And as for Venture, this joint venture will be more profitable than it exports mobiles directly to Spain because it can save the expenses like customs and cost of transport. Furthermore, Venture can easily enter the widened European market with the help of Casa's recognition in the market and the dealer network. In addition to those agreements, we are considering exports of Caravans to the US and if it turns out to be successful after a research, the balance of commerce between Spain and the US can be more even, and we can get more profits.
We consider this agreement palatable to the Spain-Us Chamber of Commerce and recommend that it would be very appreciated if you supported this joint venture and talk with people of each government about merits of it. If you are willing to do it for us, we assure that we can make the joint venture established much sooner and easier with various permissions provided by two governments.
In conclusion, we agreed to do the joint venture by making a new company with the name of 'Casa Venture' and produce various models of caravans and mobiles to export to the European market. And we feel that this joint venture goes some way toward being very successful and giving profits to each company more than before. Therefore, we must ask for your support.
Everyone in two companies hopes that you are doing well and this report will meet your needs. And we'd like to express our appreciation for your sincere concerns through these meetings. If you have any questions, please call me. We will stay at this hotel until the end of week.
Sincerely,
Hye-young Jang
Public Information Office
Casa /Venture Joint Venture Deliberations Committee