Companies

Firm that grew from 'ridiculous' blueprint

By Zhang Yuwei (China Daily)
Updated: 2011-01-14 10:07

CHICAGO - On a cold November day in 1995, a Chinese man walked into a restaurant in Chicago to meet an American banker for a business meeting.

The man, with limited English, pulled out a piece of paper and started sketching what he aimed to achieve in 10 years, with numbers, charts and his projections for the automotive industry, his specialty.

"It was the so-called blueprint," said Gary Wetzel, the banker who remembers thinking what he had seen was "just ridiculous".

The Chinese man was Ni Pin, and today his company, Chicago-based Wanxiang America Corp, employs thousands in 28 plants in 14 states in the United States, and a couple of hundred in eight facilities in Mexico.

Workers at D&R Technology, an auto sensor manufacturer in Carol Stream, Illinois, bought by Wanxiang America. [Photo / China Daily]

Wetzel is now the company's chief operating officer. Impressed by Ni's sincerity, Wetzel joined Wanxiang America a couple of years after that meeting as a short-term consultant, but ended up staying.

"In 1995, we had about $3.5 million in sales," said Ni, now in his late 40s, adding that the team comprised only three people with $20,000 in start-up cash.

"In 2010, we had about $2 billion in sales with more than 5,000 people in the US, almost all Americans, with only a dozen Chinese in supporting functions."

Wetzel said the company has "grown tremendously fast".

"And Ni is such a good manager with a big heart. He is honest and treats everyone here just like family," he said.

Wanxiang America is a subsidiary of the Wanxiang Group, from Hangzhou, Zhejiang province, in eastern China. Lu Guanqiu, the son of a farmer, built Wanxiang from a small bicycle repair shop in 1969.

Today it is one of the largest privately owned companies in China, with 40,000 employees and an annual turnover of $10 billion.

Ni, Lu's son-in-law and an MBA graduate from Zhejiang University, set up Wanxiang America when he was in a PhD program at the University of Kentucky's Department of Economics in 1994.

Ni and Lu have much in common. Both are hardworking and thrifty, and live frugal lives. But Ni is more low-key and his US operations are expanding without much media exposure.

They, however, have similar business philosophies and treat staff members like family. Ni said he would be failing in his job if any of his employees were worried about themselves.

"I am here to take care of them, so that they can take care of the company," Ni said.

Wetzel said: "Maybe that is a Chinese thing but I have met so many American executives and I haven't seen that in any of them."

In the US, Ni is often described as the "good Chinese man" who saved and created jobs, even through the financial crisis. Between 2007 and 2008, Wanxiang America saved about 2,500 jobs by buying companies on the verge of bankruptcy.

Warren Ribley, director of the Illinois Department of Commerce and Economic Opportunity, said: "Wanxiang has been a terrific corporate citizen in the state of Illinois". In 2002, Illinois proclaimed Aug 12 as Wanxiang Day.

Wanxiang is also a big player in the automotive parts industry, producing bumpers, bearings, joints and transmission parts for manufacturers including General Motors, Ford, Chrysler and Toyota.

Part of the manufacturing is in China to avoid the higher production costs in the US. Wanxiang America focuses on processing and assembly.

A key activity of Wanxiang America that has created increasing profits is mergers and acquisitions (M&A).

"We can provide value to those assets we purchase and help them stabilize and refresh their structure to grow," said Ni, adding it has become the company's "business model".

China's booming automotive industry has also given Wanxiang a boost. China's vehicle sales jumped 46 percent in 2009, overtaking the US as the world's largest auto market.

Within the auto parts manufacturing sector, Wanxiang America has made its name. Companies going through liquidity problems would come to Wanxiang when they needed capital.

Paul Cumberland, director of investment at Wanxiang America and a former Citibank manager, said: "We've done everything from buying individual (privately owned) companies to buying a division of a really large company - deals ranging from $30-$40 million to $300 million."

Since the company began in 1994, it has acquired more than 20 US businesses in several states including Illinois, Michigan and Missouri.

"We purchase two or three companies every year, and we save and create at least a couple of hundred jobs," said Ni.

Since 2006, Wanxiang America stepped up its acquisitions because "we know what we are doing", said Cumberland.

In 2007, Wanxiang America acquired the North American coupled-products business of Dana Corp, which was under Chapter 11 bankruptcy protection. The following year, Wanxiang's Pennsylvania-based affiliate, Neapco LLC, bought the drive-shaft business unit from Ford.

In a deal closed last October, it acquired 51 percent of D&R Technology, a 13-year-old automotive sensor manufacturer in Carol Stream, Illinois. Previously, Wanxiang was a D&R client.

Anthony Urban, president of D&R, said it was not a "distressed sale" but it chose Wanxiang, the only Chinese company among the potential buyers, because it is good to be part of Wanxiang, which carries the "we are a big family" philosophy.

"Ni is so well-connected in the industry and he can help us grow," said Urban, adding that his company is looking at building a plant in Hangzhou with Ni's help.

Wanxiang America's business model of a Chinese company going global has been used as a case study by Harvard Business School since 2008.

Julian Chang, executive director of the Ash Center of the Harvard Kennedy School, said Wanxiang is not only a successful auto parts brand, but also offers its services to companies to help invest in, or source from, China.

"This expansion beyond their core competencies is a logical add-on service in a complicated environment," said Chang.

Ni said he has no secrets in running the business. But in the meantime, he may be just taking a different approach from other Chinese businessmen.

"He (Ni) didn't come here and buy a bunch of companies. He took the time to learn how we do things in the US," said Cumberland.

Ni said that in the US, companies need to respect and follow the rules.

"If you come here and try to re-establish what your American counterparts have established, the only thing that is going to happen is you will pay double the price for sure," Ni said.

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In the past decade, many Chinese companies - State and privately owned - have been catching up on overseas investment.

Ribley, from the Illinois government, said more than 30 Chinese companies have invested in the state.

But Wanxiang doesn't make the mistake that some Chinese companies have made in terms of overseas M&As, such as moving the management team from China to the US.

Urban said Wanxiang lets the original management team run the company after the purchase.

"Of course, you have to learn to trust people and let them do things," said Ni.

Kris Knutsen, a senior manager at the Chinese Services Group at Deloitte LLP, said Wanxiang is doing a great job in localization.