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
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.
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
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.
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”.
“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.
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.
Wanxiang America’s headquarters in Elgin, Illinois.
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.