Wanx­i­ang Amer­ica: Find your value, max­i­mize it

One in ev­ery two ve­hi­cles made in the US is equipped with com­po­nents made at its US plants. The El­gin, Illinois-based com­pany rein­vests all its prof­its in the US. It has op­er­a­tions in 26 US states and em­ploys more than 13,500 peo­ple. And when it comes to

China Daily (Canada) - - IN DEPTH -

It’s a pres­i­den­tial elec­tion year in the US again. The mem­ory of the last one in 2012 is still fresh in Ni Pin’s mind. That was when Wanx­i­ang Amer­ica, the US sub­sidiary of Wanx­i­ang Group, the largest auto parts man­u­fac­turer in China, pro­posed ac­quir­ing A123 Sys­tems, a bank­rupt lithium-ion bat­tery man­u­fac­turer in Michi­gan, which re­ceived a grant from the US En­ergy Depart­ment and had some US mil­i­tary con­tracts.

It was a tough fight for Ni, Wanx­i­ang Amer­ica’s pres­i­dent. Politi­cians ac­cused Wanx­i­ang, or more gen­er­ally China, of steal­ing US tech­nol­ogy and tax­pay­ers’ money.

In the end, Wanx­i­ang closed the deal, spin­ning off the mil­i­tary busi­ness to an­other buyer, pay­ing $256.6 mil­lion and pledg­ing to keep the man­age­ment team and em­ploy­ees.

“A123 is just one of the many com­pa­nies that we bought. And, to be hon­est, we have deals that were done more beau­ti­fully,” said Ni dur­ing an in­ter­view with China Daily. “It be­came con­tro­ver­sial and talked about just be­cause the deal oc­curred in an elec­tion year.”

In a lit­tle more than a year af­ter the deal closed in Jan­uary 2013, A123 started to gen­er­ate pos­i­tive cash flow. Its ad­vanced bat­ter­ies, mainly used by elec­tric cars, is a good fit for Wanx­i­ang Group’s goal to be­come a leader in the global clean en­ergy and elec­tric ve­hi­cle field.

Now pro­duc­tion can­not keep up with the de­mand, ac­cord­ing to Ni. More than 70 per­cent of its bat­ter­ies are shipped to China.

M&Ms

The rea­sons for A123’s suc­cess can be sum­ma­rized by us­ing M&Ms, Ni said, re­fer­ring to the colorful choco­late candy.

The first M refers to Mar­ket. “China now is the world’s largest mar­ket. The de­mand for a high-qual­ity bat­tery is huge. That is the sim­plest and most im­por­tant fac­tor in turn­ing around the com­pany,” said Ni, now in his early 50s but ra­di­at­ing a youth­ful en­ergy that hides his age.

The se­cond M refers to Man­age­ment. Ni said he now has a man­age­ment team that can quickly fix and turn around stressed busi­nesses. Man­age­ment is what Wanx­i­ang came to the US to learn some 20 years ago.

“Work­ing in the US will help us change our man­age­ment skills, which will in­deed im­prove our abil­i­ties as a global com­pany,” said Ni, who launched Wanx­i­ang Amer­ica from a home-turned-sales of­fice with a per­sonal in­vest­ment of $20,000 in 1994, mainly sell­ing auto parts made by its par­ent com­pany to US cus­tomers.

Wanx­i­ang Group has be­come a global com­pany with $25 bil­lion in rev­enue, own­ing more than 40 au­toman­u­fac­tur­ing plants world­wide. One in ev­ery two ve­hi­cles made in the US is equipped with com­po­nents made in Wanx­i­ang’s US plants.

Less than 10 years ago, M&M, how­ever, meant dif­fer­ent things to Ni: Ma­te­rial and Money.

When the US econ­omy

hit

a down­turn in 2008, many US com­pa­nies, es­pe­cially auto parts man­u­fac­tur­ers, were near bank­ruptcy. They turned to Wanx­i­ang Amer­ica for help.

Be­ing well-con­nected with China and hav­ing a global net­work, Wanx­i­ang Amer­ica man­aged to find cheaper ma­te­ri­als to cut pro­duc­tion costs and in­jected in­vest­ment money to re­vive some of those plants.

Ac­cord­ing to Ni, 3,500 jobs were saved from 2007-2009 when those com­pa­nies were res­cued. Wanx­i­ang was hailed by lo­cal gov­ern­ments as “truly the sweet choco­late”, as Ni put it, which in­spired him to come up with the metaphor of M&M.

For Ni, the two sets of M&Ms ex­em­plify the evolv­ing dif­fer­ences be­tween the US and China and that is where op­por­tu­ni­ties ex­ist, not only for Wanx­i­ang, but for other Chi­nese com­pa­nies.

“We have been very lucky. The US and China are such great coun­tries, and we have huge dif­fer­ences. Dif­fer­ences will give us huge room to com­pete with each other, and we can still sur­vive,” said Ni. “We have to bring in the value that our lo­cal com­peti­tors can­not. Sim­ply be­cause we are from China, we have re­sources that our com­peti­tors of­ten do not have.”

But since the US and Chi­nese economies are con­stantly evolv­ing, Ni has to keep up with the change and dis­cover new val­ues.

While some Chi­nese in­vest­ments have made big head­lines in re­cent years, such as Shuanghui ac­quir­ing Smith­field Foods, Len­ovo buy­ing Mo­torola and Wanda snap­ping up AMC and Leg­endary En­ter­tain­ment, Ni was qui­etly ac­quir­ing rel­a­tively smaller com­pa­nies un­til the A123 deal put him at the cen­ter of me­dia at­ten­tion.

Along the way, Wanx­i­ang Amer­ica added in­creas­ingly di­verse yet strate­gi­cally im­por­tant in­dus­tries that align well with its par­ent com­pany’s global vi­sion, in­clud­ing clean en­ergy, fi­nan­cial ser­vices and real es­tate. The El­gin, Illinois-based com­pany now owns over 100 as­sets and op­er­a­tions in 26 US states, em­ploy­ing more than 13,500 peo­ple and gen­er­at­ing rev­enue of $3.5 bil­lion in 2015.

Its clean en­ergy sec­tor in­cludes so­lar panel pro­duc­tion fa­cil­i­ties, bat­tery plants and elec­tronic ve­hi­cle mak­ers, in­clud­ing Karma Au­to­mo­bile, for­merly Fisker Au­to­mo­bile, ac­quired by Wanx­i­ang in 2014.

Wanx­i­ang’s US real es­tate unit in­cludes of­fice tow­ers, shop­ping cen­ters, ware­houses and re­sort homes, mak­ing it the se­cond-largest Chi­nese real es­tate in­vestor by num­ber of prop­er­ties held in the US, ac­cord­ing to Real Cap­i­tal An­a­lyt­ics Inc.

Ni also strives to turn com­pe­ti­tion into col­lab­o­ra­tion when it comes to max­i­miz­ing the dif­fer­ences be­tween the US and China, “The dif­fer­ences be­tween the two coun­tries will also give us even more op­por­tu­ni­ties that we can col­lab­o­rate with each other and we can all win in the end,” Ni said.

Les­son learned

Ni learned the power of col­lab­o­ra­tion from his first client in the US.

Shortly af­ter he launched Wanx­i­ang Amer­ica, Ni re­ceived an or­der from a dealer in Cleve­land, Ohio. Days later, the client called com­plain­ing about a wrong ship­ment. Ni then drove nearly six hours to apol­o­gize face to face to the client and gave back the orig­i­nal pay­ment check. The client was deeply moved and has since stayed with Wanx­i­ang.

A few years later, af­ter Ni grad­u­ally built Wanx­i­ang’s rep­u­ta­tion in the auto parts world, in­clud­ing be­com­ing the sta­ple sup­plier to the Big Three (Gen­eral Mo­tors, Ford and Chrysler), he got an­other call from that client, ask­ing him to take ma­jor­ity own­er­ship of the com­pany at no cost.

“He said to me: ‘If I sell the prod­uct, I charge $1 more, you are go­ing to have $1 less. If we can work to­gether, there might be $2 or $3 that we can cre­ate on the ta­ble, which we can share,’” Ni re­called.

He has since taken this con­cept to heart. When Zeller Cor­po­ra­tion, a lead­ing Amer­i­can auto parts man­u­fac­turer and Wanx­i­ang’s first Western client, as well as some sub­sidiaries con­trolled by the Big Three, faced fi­nan­cial dif­fi­cul­ties and turned to Ni for help, Wanx­i­ang em­braced them.

Wanx­i­ang usu­ally would keep the brand name of ac­quired com­pa­nies and their ex­ec­u­tive teams and la­bor forces as in­tact as fi­nan­cially fea­si­ble. Ni likes to call them “part­ners” in co­op­er­a­tion. “Com­pe­ti­tion is just a re­al­ity, but the prob­lem is that com­pe­ti­tion does not help you to ex­pand your fron­tier, co­op­er­a­tion does,” he said.

In Ni’s the­ory of co­op­er­a­tion, trans­parency and com­pro­mise take cen­tral stage.

In Wanx­i­ang Amer­ica’s early years, Ni had “more FBI vis­its than cus­tomer vis­its”, al­most once ev­ery quar­ter, then he had re­views by US cus­toms, im­mi­gra­tion, the In­ter­nal Rev­enue Ser­vice, and many other govern­ment agen­cies. “Frankly speak­ing, it helped us to learn to how to be trans­par­ent,” said Ni.

Ni later re­al­ize that “trans­parency is also the most im­por­tant way to com­mu­ni­cate” with his part­ners. “Be­cause we came from China, we have a dif­fer­ent lan­guage and a dif­fer­ent cul­ture; be­ing trans­par­ent is so crit­i­cal,” he said.

Ni’s first chal­lenge as spokesman for Wanx­i­ang’s prod­ucts, which back then was mainly the uni­ver­sal joint auto part, was to ex­plain that Wanx­i­ang (pro­nounced Wahn-Shung) means “uni­ver­sal” in Chi­nese, so peo­ple would not think he was sell­ing wax.

Ni didn’t come to the US as an ice­breaker for Wanx­i­ang. He ar­rived as a doc­toral stu­dent in eco­nom­ics at the Univer­sity of Ken­tucky. Two years later, Lu Guan­qiu, his father-in-law, the chair­man of Wanx­i­ang Group and a leg­endary fig­ure in China, called him to chart a path for Wanx­i­ang in the US.

Lu started a bi­cy­cle and farm tool re­pair shop in 1969 when China was still buried in “cul­tural rev­o­lu­tion” (1967-77). He later made him­self a house­hold name af­ter the coun­try launched re­forms in the 1980s, and he was among the first peo­ple to get rich. Newsweek mag­a­zine fea­tured Lu on its cover in 1991. He was ranked the 13th wealth­i­est in­di­vid­ual in China by Forbes mag­a­zine last year.

Ni also be­lieves in one of his fa­therin-law’s fa­mous say­ings: “Shar­ing the money is more im­por­tant than mak­ing the money. If you know how to share money, you can make money pretty eas­ily.”

“If you give a lit­tle bit more, which is to com­pro­mise, then you gain the part­ner­ship, and you gain more,” Ni added his own touch to the con­cept. “Trans­parency and com­pro­mise. With th­ese two in your mind, you can com­mu­ni­cate with any­one.”

Ni’s co­op­er­a­tion also in­cludes a schol­ar­ship pro­gram that Wanx­i­ang es­tab­lished with Delaware’s state govern­ment. It gave $450,000 to send high school stu­dents to study Man­darin at Wanx­i­ang’s Hangzhou head­quar­ters in 2015 and 2016. It is part of Pres­i­dent Barack Obama’s 100,000 Strong Ini­tia­tive to en­cour­age more Amer­i­can stu­dents to study in China.

The schol­ar­ship pro­gram is a con­tin­u­ing part­ner­ship be­tween Ni and the state of Delaware, which gave Wanx­i­ang es­sen­tial sup­port in its suc­cess­ful bid for Fisker in 2014, once a com­peti­tor for Tesla. Delaware pro­vided Fisker seed money in 2009 to build an as­sem­bly line at a for­mer Gen­eral Mo­tors plant.

Ni’s man­age­ment phi­los­o­phy seems to also align with his stream­lined and good­will ap­proach to part­ner­ships, which if sum­ma­rized in one word would be “in­cen­tivize”.

‘In­cen­tivize’

“As long as we are fair, we give them the op­por­tu­nity. When the re­sult is there, we re­ward them. When we do that, you can­not be­lieve how pow­er­ful this can be. It does not mat­ter whether it is CEO or jan­i­tor. If given the power to make it right, they can make it right.”

Ni said he does not need a big cen­tral man­age­ment team for the sprawl­ing en­ti­ties he over­sees. There are only about 40 peo­ple with him at the head­quar­ters’ con­trol cen­ter and lo­cal hires make up a good per­cent­age of them.

“I am not try­ing to man­age peo­ple, it is too com­pli­cated. If you in­cen­tivize peo­ple, I know what they are go­ing to do be­cause logic will pre­vail in the end,” said Ni, who got his MBA de­gree from one of the top univer­si­ties in China in 1989 be­fore join­ing Wanx­i­ang. At that time, an MBA was rare in China. At Wanx­i­ang, Ni met his wife.

Among Wanx­i­ang Group’s global op­er­a­tions, the US ones give the great­est re­turn. Ni likes to call his Wanx­i­ang Amer­ica a true Amer­i­can com­pany. Other than pay­ing taxes to the US govern­ment and hir­ing Amer­i­cans, the com­pany also keeps all its profit in the US for rein­vest­ment, as he told CBS-TV’ s “60 Min­utes’’.

Ni at­tributes that to the na­ture of the US econ­omy and one’s abil­ity to un­der­stand and make good use of it.

“Here in the US, the busi­ness cy­cle is al­ways there. This is what I love about the US en­vi­ron­ment. You just need to wait for the right time, you get in, then you are cov­ered,” he said.

His ad­vice

Many Chi­nese com­pa­nies have asked Ni for ad­vice on how to do well in the US, es­pe­cially when fac­ing deals such as the A123 con­tro­versy that Ni ex­pe­ri­enced, which have to go through the scru­tiny of the Com­mit­tee on For­eign In­vest­ment in the United States (CFIUS), an in­ter-agency com­mit­tee led by the US Trea­sury to check on a trans­ac­tion’s im­pact on na­tional se­cu­rity.

“I al­ways joke with them, just find a more ex­pen­sive lawyer,” said Ni. “As long as you have the bet­ter lawyer, you are go­ing to come through be­cause the rule has al­ready been es­tab­lished.”

When John­son Con­trols, a lead­ing player in auto parts, joined the A123 bank­ruptcy auc­tion bid at a later time with a lower bid, Ni hired a top law firm in Wash­ing­ton to ar­gue that the bid­ding process vi­o­lated pro­to­col.

“China in the past three decades is more about break­ing the rules, be­cause we are in the re­form mode and we need to con­stantly push the en­ve­lope to move on,” said Ni. “But in the US, you need to re­ally fol­low the rules.”

Ni has shown that he not only fol­lows the rules, he is good at it.

Con­tact the writer at charlenecai@ chi­nadai­lyusa.com.

PRO­VIDED TO CHINA DAILY

Wanx­i­ang Amer­ica’s head­quar­ters in El­gin, Illinois.

PRO­VIDED TO CHINA DAILY

Ni Pin Pres­i­dent, Wanx­i­ang Amer­ica

A123 Sys­tems’ lithium-ion bat­tery man­u­fac­tur­ing fa­cil­ity in Livo­nia, Michi­gan. Wanx­i­ang Amer­ica bought the bank­rupt com­pany in 2013, spend­ing $256.6 mil­lion.

Lu Guan­qiu, founder and chair­man of Wanx­i­ang Group, was fea­tured on the May 1991 cover of Newsweek as a pi­o­neer in China’s re­form and open­ing up.

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