from nothing to a profitable wholly owned foreign investment enterprise in runzhou, zhenjiang, china...
TRANSCRIPT
From nothing to a profitable wholly owned foreign investment enterprise in RunZhou, Zhenjiang, China in 250 days.
Tenacis Inc.Real Estate
White Drive Products GmbHEurope Sales & Distribution Center
Global Logistics CenterConsolidated shipments
Hopkinsville USA
WH Manufacturing Inc.Hopkinsville KY USA
White Drive Products IncGlobal Sales, Marketing,
Engineering & Testing
White (China) Drive Products Co. Ltd
Zhenjiang China Manufacturing
White Drive Products Hong KongAsian Sales & Distribution Center
LessLabor Inc.Automation
Manufacturing
Propulsys IncHolding Company
World Headquarters
Hopkinsville, Kentucky,
U.S.A.
Core Products
Gerotor Hydraulic MotorsLow speed High TorqueA lot of power in a small package+/- 80% efficiency
Hydraulic BrakesIntegrated with the gerotor hydraulic motorStand alone operation
Production demands precision engineeringVery tight tolerance machining typical 2/10,000
inch(40 times smaller than the thickness of a typical
black human hair).
Hydraulic Gerotor Motors
Hydraulic Brakes & Integrated Motor Brakes
Where are these motors and brakes used?
Mobile Equipment is the largest sector.
It is hard to go through a day where our products have not had an impact on your life in
some way.
Aerial Work Platforms
Agricultural Equipment
Concrete & Paving Equipment
Construction Equipment
Cranes, Winches & Utility Vehicles
Lawn Care Products
Why China?Why China?
Chinese domestic demand:a. Already the largest market in
Asiab. Forecasted to double in size in
the next 5 yearsc. Industrial & Service infra-
structure supportd. Chinese competitors were
already emerging
Propulsys – China Strategy
4 key strategic reasons for Propulsys to opening a company in China:
Participation Access Capacity Expected
Establishing a company in China
Acquire an existing Chinese company: Hard to find a good one that wants
to sell right now! Who are the current owners? Takes a great deal of time and will
not necessarily fit!
Establishing a company in China
Form a Joint Venture partnership:Very difficult- many cross cultural issues cloud the
opportunities We tried……
• We established a supply agreement with a Chinese manufacturer.
• We established a good relationship… • We greatly exceeded forecasts.• 18 months of dedicated and supportive
negotiations to establish a J/V to manufacture additional new products.
Failed….January 17, 2005• Failed because the Chinese major stake holder
did not want the control of the shares and votes and investment….
• But, wanted control of his “destiny”…wanted to do it his way!
Establishing a company in China
Create a new company in China
Challenging in a country with such a long cultural history.
Administrative challenges Language barriers But, we had learnt a lot
Where do you begin?
Critical factors to be considered :Resource availability:
Industrial LandSkilled work forceGood infra-structuresEnergy supplies
Attitude of the local government to new businesses
THIS MOST IMPORTANT
Why RunZhou, Zhenjiang, Jiangsu?
Location of Zhenjiang City and the district of RunZhou.
RunzhouRunzhou
NanjingNanjingShanghaiShanghai
Yangtze River delta is one of the machinery centers of both China and
the world
Zhenjiang has a population of Zhenjiang has a population of 2.89Million2.89Million
Zhenjiang a city
with over 3,000
years of history.
Zhenjiang cultural heritage
Zhenjiang Infra-Structure
Zhenjiang is pivotally located with a highly developed infra-structure, including a deep sea port.
Bridging north & south China across the mighty Yangtze River
UTILITIES
ABUNDANT SUPPLIES of ELECTRICITY, GAS and WATER
Zhenjiang Education System
6 universities
9 professional colleges
14 adult education schools
Annually:
20,000 qualified technical graduates 210,000 student graduates
Resource availability: Industrial Land Highly available and well located Skilled work force Plentiful & skilled at all levels Good infra-structures Good and getting better
every day Energy Well planned energy resources, with daily
availability. Attitude of the local government to new
businesses We traveled China in search of the right location,
Beijing…..Jinan…..Wuxi…..Suzhou..…Shanghai….. Ningbo….. Guangzhou…..Shenzhen and more.
Zhenjiang & RunZhou Governments offered the BEST new business investment environment.
Why Runzhou, Zhenjiang, Jiangsu?
If you learn nothing else from my presentation….please learn this!
The key to success in ChinaIs not your investmentIs not your productsIs not your designs Is not your production techniques
It is RELATIONSHIPS!50% of your executive manager’s
time will be absorbed in building and sustaining relationships
Key objectives established at 1st meeting with RunZhou District
Government . Day 1 - January 24, 2005
• Conclude negotiations with the Chinese authorities to:– Establish a Wholly Owned Foreign Investment Enterprise. – Target April 30, 2005
• Maximize incentive and tax benefits for 5 years & beyond– Target April 30, 2005
• Obtain Business License– Target April 30, 2005
• Conclude Land Use Contract– Target April 30, 2005
• Establish bank accounts and financial relationship– Target April 30, 2005
• Selection and appointment of critical managers– Target May 15, 2005
• Take “possession” of the land– Target May 31, 2005
• Construction of 92,000 sq ft building to be completed by September 30, 2005
• Commence production November 1, 2005
White (China) Drive Products Co. Ltd.Business License issued April 28, 2005
Ground Zero May 2005
Foundation Stone Laying Ceremony June 8, 2005
Unshakeable Foundations… like the Great Wall of China
Progress….. Late August , 2005
The building contractors have gone……October 2005
WCDP Electrical Sub-station
Heat Treatment
Production EquipmentOperating 24/7
Wash, Dry and Paint Operation
QMS Equipment
Test Lab and R&D Center
The first BK10 Hydraulic Brake January 6, 2006
Cost of Operating in China
Utility costs
Electricity: $0.05/kw/h
Water: $0.28/m3
Gas: $0.30/m3
Material Costs
Typical savings versus the same or similar material in USA
45+%
Because we are a Chinese company
design engineer
skilled worker
technical operator
middle manager
senior manager
$2000
$3000
$6500
$5000
$10000+
HUMAN RESOURCE COSTS PER YEAR
Company Vision
Conduct Research and Development, Manufacture and Sale of:Advanced technology multi-disc
integrated and non-integrated brakes.New generation of gerotor motors
using state of the art materials and process technologies.
New generation of steering units using state of the art materials and process technologies.
Company Mission
WCDP will design, develop and manufacture
1. World class quality products2. Sell them at competitive prices 3. Be the worlds lowest cost
manufacturer of these products.
Managing a Chinese Company
Traditionally foreign investors make one of two choices in the management of their Chinese company:
Employ expatriates as their senior managers Transfer the “corporate” management skills Transfer good and bad habits Transfer this is the way we do it in …….
Result: An American managed company in China, and loss of gains to
be made through synergies of Chinese and American techniques & management style.
Employ only Chinese
No transfer of corporate management skills Only Chinese good & bad habits Very poor inter-company communications
Result: A Chinese Managed company with NO synergies
ORYou can choose to develop a cross cultural
management team to take the best of both cultures!
Senior Managers
Jennifer ChenV/GM Operations & Sales
Paul ChenV/GM Employee Development
Dr. John ZhangEngineering Manager
Mike YuanFinance Manager
Developing our company culture
WCDP takes the wonderful 5,000 years of Chinese culture and blends it with the best western practices and management techniques to create our own culture.WCDP is different… unique.. Members of a new order.
The WCDP culture Equal opportunity is given to every employee. All employees are given the opportunity to
develop and grow. There are no limits… all employees can be as
good as THEY want to be. All employees strive every day to be the very
best. WCDP rewards those who make significant
contributions WCDP has established a team environment, with
every team member accepting their responsibilities as members of the WCDP team.
4 Strategies of Operational Excellence that position our Chinese plant as a
world leader1. Customized and system controlled
manufacturing, using state of the art ERP technologies
2. Lean manufacturing technologies to achieve a production velocity of 10 days.
3. Utilize new technologies and materials to achieve lowest total production costs
4. One piece flow – not just batch production, but meeting the needs of the customer
Information Technologies Strategies
Integrate WCDP into corporate wide global ERP system and 24 hour 7 days a week intranet capabilities, using latest technologies and systems.
• Access to all data bases in Mandarin to facilitate knowledge driven decisions.
• Flexible hardware and software systems that are rapidly expandable and support double digit growth
• Application of customized ERP technology to speed up the manufacturing cycle to:
» Optimize equipment utilization» Minimize inventories» Maximize productivity
• Quality Management integrated into the total ERP system
Manning Plan
WCDP:Current Plan
Has a well defined development and manufacturing program
Current Products
BK10 Multi Disc Brake SB Multi Disc Brake WR Motor
Future Plans….
Propulsys believes it is uniquely positioned:
Many companies including Fortune 500 companies recognize the need to be in China, but:
Lack the knowledge and skills to establish a manufacturing and or logistics operation in China.
Do not understand “how China works” Do not have the government contacts Are afraid of the unknown and distrust the
Chinese Top executives are not prepared to spend the
time in China working through these issues Have great concerns about systems
integration
Future Plans….
WCDP has the capability of addressing all of these issues and concerns.
Propulsys Inc. is prepared to invest more to expand and diversify when the opportunity arises.
WCDP has firm options with RunZhou Government that will triple the land area.
Future Plans
WCDP will offer to third party companies:
Strategic Partnership Relationship to design, develop and manufacture: Finished Products
Major sub-assemblies Metric designs
Chinese materials and components.
What are your plans for the future?
If China is in your future, now you have 2 new possible investment opportunities:
1. A strategic partnership with WCDP or,
2. Directly with the RunZhou Government
Can we help you?