For the past decade, the world’s trailer manufacturing sector has kept a keen eye on China’s successful container giant, China International Marine Containers (CIMC), as it entered the commercial road transport sector. The expansion has seen the company adapt its business modelling and quality control approach along the way. Ten years on, a consolidation phase is now palpable, while a renewed global thrust is being planned.
The road to corporate globalisation is littered with expensive setbacks. But, the corporations and fledgling enterprises that have shown the ability to learn from and apply targeted expertise to overcoming setbacks, often emerge the stronger for it.
CIMC has weathered its fair share of criticism, partly based on the enduring preconception that China’s manufacturing juggernaut might be able to outgun its European and American counterparts in the cheap production department, but whether producing domestically or off-shore, quality control issues still have some way to go. China watchers are beginning to see a turnaround in that quality thinking as the world’s most populous nation increasingly grasps global standard requirements. And, in CIMC’s case, a high quality build has gone to the head of the priority list.
This particular diverse, publicly-listed company, has had no difficulty in finding itself on influential domestic and international business ranking lists that position it as a serious player and on the upward climb, but its foray into the trailer sector has been a study in globalising learning curves and adaptability. There may be some competitive comfort in thinking that CIMC still has a long road to travel in this sector – until you seek an in-depth update from the company’s Managing Director, David Li, who graduated from the Business School of Southern Connecticut State University with a master’s degree in economics. He also holds an engineering degree from Shanghai Jiaotong University, one of China’s most prestigious engineering universities.
The tough lessons learned in the past decade and the ability to address and rectify the roadblocks come under his stewardship. In his spacious, yet unobtrusive office overlooking China’s Shenzhen Harbour – the third busiest behind Shanghai and Hong Kong – he is keen to discuss the company’s plans for the future. In the global corporation scheme of things, 10 years is not a long time in which to bring about a start up, iron out the blockages to progress and reach a consolidation phase that then sets a platform for future expansion. Li makes it clear straight up that he’s about perfecting the products. Achieving that vital quality is priority number one at this point and growth will take a back seat to that in the interim. The catalyst for change has come about via initial experiences in Europe, where Li concedes to being “confused” when a seemingly simple design prototype attracted an extensive deficiency report. Other spheres of operation have made it plain there isn’t a one-size-fits-all approach to the trailer business. Li admits they are strong lessons to learn, but make no mistake, he is equally clear that CIMC is not wavering off a global success path, with a new five year plan in place. “We rose from zero to a serious player in the global market in only one decade. Now it’s time to offer the global marketplace a new deal. We want to bring in a new breeze. We have the capital, and we have the technology, so why not?”
Founded in January 1980, it has been the world’s largest shipping container manufacturer for over a decade and listed on the Shenzhen Stock Exchange since 1994. CIMC has spread its tentacles into not only the trailer building industry, but also into supplying the CNG and LNG markets, airport facilities and even a port.
On Li’s watch, CIMC captured a leading role in manufacturing transport equipment on the Chinese mainland, producing more than 200,000 units a year, with a goal of achieving revenue of RMB 100 billion (€11 billion) by 2012.
It currently ranks among China’s 50 leading companies. But, the company’s medium-term goal was not limited to dominating a domestic market. Li’s blueprint is still to make CIMC the world’s leading trailer manufacturing company. By 2009, he had achieved a listing in the Forbe’s leading 2000 global companies list, with an impressive infra-structure and investment base. There are 22 international production sites, 150 subsidiaries and 63,000 staff across China, North America, Europe, Asia and Australia. Sourcing expertise, understanding different markets and carefully positioning financial and other resources underpinned its expansion strategy.
The foundations, however, remain firmly planted in China. Here, CIMC has deep pockets – drawing on an asset base worth RMB 54.13 billion (€6 billion). In 2010, the corporation generated RMB 51.77 billion (€5.7 billion) in annual sales and a net profit of RMB 3.68 billion (€500 million). According to Li, who has worked for CIMC since 1987, the path to global expansion has long been set – and the mission statement is simple and unwavering: “I want CIMC to lead the world’s trailing equipment industry. I have always been influenced by the corporate vision to be a leading force in the global market, serving the marine and trucking industry.”
CIMC is not atypical of the types of enterprises that made the world sit up and take notice when China first began a more “open door” and globalising policy towards business expansion. CIMC started manufacturing marine containers in Shenzen – then a village in the south of China's Guangdong Province nominated as a special economic zone. The sheer volumes of Chinese output that flooded the international market, not only saw a domestic container manufacturer boom, but its home port morph into a bustling metropolis. It is home to a 194,000m2 production plant – and CIMC’s head office oversees the bustling harbour.
Based on vast experience in container manufacturing, CIMC entered the commercial road transport industry in 2002, rapidly becoming China’s largest player. It then took its global turn. Today, the ever-growing product range – including container chassis, flatbed trailers, bulk lorries, tankers, self-dumpers, reefers, vans, curtain siders, mixers, pump trucks, car carrier vehicles, fire engines and sanitation vehicles – is available in the US, Europe, Japan and emerging markets around the globe. To provide ongoing customer service, the Group has established a network of 400 service stations in North America, Asia, Europe and Australia.
Although CIMC’s core business is still marine container manufacturing, the trailing equipment division has become a reliable mainstay. “Be here to serve, rather than be in China to sell,” is a mantra repeated at CIMC management level.
As it travelled outward, a high level of value was placed on what Li calls “combining knowledge sourced around the world.” In other words, take the best design elements from a range of tried and true manufactures and combine them for the best outcome. Li could adapt output to suit rather than being restricted by existing manufacturing processes. “The application of this is already evidenced in design and manufacturing that has led to technology developed in Europe being adapted to a special Australian design that is built in China.”
Australia provided some early inspiration for CIMC’s decision to enter the commercial road transport industry. In 2000, a Chinese delegation, including Li, visited a road transport exhibition in Melbourne. What he observed helped lay the foundation for the company’s future venture into the trailing equipment sector. “We were quite impressed by the common Australian B-double combination. At the time, China’s trailer industry only produced simple skeletal chassis and a few flat bed variations. It was old fashioned, so we thought we should introduce such a concept to the Chinese market.”
Technology transfer aside, this was the genesis of a new international business division. It quickly headed down the acquisition path. In 2003, CIMC acquired US company, HPA Monon Corp, creating Vanguard National Trailer, a subsidiary producing dry van trailers in Monon, Indiana. After establishing operations in the Great Lakes Region, the first Sino-American trailer left the new manufacturing line in February 2004.
A year later, CIMC entered the Japanese market, co-operating with local trading company Sumitomo Corp. and Nippon Trex. In 2006, CIMC set foot in the Australian market, founding a local subsidiary, CIMC Australia and in 2007, went into Europe by acquiring renowned Dutch company, Burg Industries, to gain a clear understanding of the European market and capitalise on Burg’s combined experience. At the same time, CIMC acquired Australian tanker manufacturer Marshall Lethlean and set up a branch in Thailand, again supported by Sumitomo. In 2010, CIMC Burg Germany was established to enter that market.
However, Li discovered that becoming a globalised brand is not that easy. A key hurdle lay in European quality standards. The beginning of the European endeavour saw CIMC building a basic 45’’ container chassis. “It’s a simple design and we thought it would be the ideal model to start off in a competitive, yet demanding market,” says Li. “It does not require special equipment in the manufacturing process and we were able to draw on all the knowledge gained in China and North America. We thought it would be a simple task. But, we were wrong!”
Presentation of the first prototype saw CIMC receive a 30-page deficiency report. “We were confused,” Li admits. “Why would Europe refuse a tried and tested product?” To understand the new market, the company sent an engineering team to Europe to learn the ropes at LAG, a Burg subsidiary specialising in customised road transport equipment. The four-week European “apprenticeship” paid off. CIMC set up a facsimile of the Belgian LAG factory back in China based on the same machinery and production process, naming it LAG 2. “Once we reached a consistent quality level, we tried to implement our experience in mass production to optimise the LAG 2 project. In collaboration with LAG’s experienced engineering department, we were soon able to present a product to match the European original,” Li says.
To prove they were serious and to maintain a distinct level of build quality, CIMC opened an R&D facility in Shenzhen and committed to the international ISO/TS 16949 standard. The in-house R&D centre is stocked with testing equipment and analysis software capable of simulating different levels of mechanical loading in real life conditions. “We can test and trial chassis rails, skid plates, frames and cross member connections, axles and suspension with regard to durability, overall resilience and longevity,” says Li. “The products we produce for each market are extensively validated during the testing processes. In fact, we are the only global trailer manufacturer capable of testing a full semi trailer in motion. We are able to simulate varying road conditions, loadings and traffic in a safe environment. We have come a long way since we first entered the European market, but there is so much potential left to tap.”
CIMC’s current position is indicative of the tenacity and focus it is prepared to employ to persist with its global brand. While its domestic market share continues to grow, on a global scale, the company is still scratching the surface. “In the Middle East, South America, Europe and Australia we are in a start-up phase and we still need all the attention we can get to keep growing,” says Li. “The European venture helped shape CIMC. Today, we don’t try to attract attention by offering low priced products – and thereby upsetting the local market – but, by providing quality.”
Li knows that there is a long way to go to convince the wider market that a serious spotlight has been turned on high quality production. “We still encounter resistance in convincing people that a Chinese finish does not imply inferior quality,” Li says. “But, I am confident that time will prove us right. Establishing a global engineering network is the best possible answer to any question concerning build quality.”
Quality is one tool in the global quest for market share, but cost-effective innovation is another. And, Li has that on his agenda too. He doesn’t just want to be level with the pack, but offers a visionary view of using the best technology to contain costs as well. “Growth is not only based on skill, after all, but also on innovation. A lot of people can provide quality. But, we are able to create add-on value; utilising our global technological wisdom to offer increased value at the same cost, or the same function at decreased cost,” Li says.
Communication flow and constant exchange of information has become an integral part of the business model post-GFC. “Our international network will enable us to share some sort of global wisdom regarding engineering and design. We are able to interact globally and exchange ideas; we are crossing borders, geographically and mentally.”
Like all business optimism, though, a clear head is required to determine and deal with some clouds on the horizon. Rising energy costs and component shortages are cause for concern for the entire global sector. Tyre supply has become a particular issue, as rubber continues in the grip of a global shortage. Nonetheless, Li offers only optimism and a few new systems as well. “I am sure that we are facing a bright future after the GFC and I hope that we can maintain the positive atmosphere we have developed in the past,” Li says. A core part of the company’s model lies in planned and prudent human resource management. “We want people to stick to the principles we have established in the past. Everybody should contribute to the company’s future, the global innovation pool.” More than just corporate mantra, CIMC is actively changing its human resources policy to a rotating system. It seeks to educate the company’s international staff in China in the company’s direction and at the same time is sending Chinese employees to work in different countries.
“We need to avoid a mental one-way traffic. As we are constantly growing, we need to make sure that every new employee can gain the same understanding as the existing staff. That’s a challenge on a management level. We have to make sure that the global exchange is working.” As a result, CIMC is actively recruiting talented staff globally to accumulate both capital and expertise. “It’s a two-way street. I hope we can provide enough skill to manage such a global operation. The term ‘international operation’ sounds great, but it also requires great skill.”
Steering a company the Li way means a hands-on approach and constant interaction on a personal level. “I like to see the business grow hand-in-hand with the people we employ,” he says. “That’s why we do not search for a major acquisition target, but try to carry out our growth in local markets in an organic way. If there is a bargain offering though, we will take a chance. But, we are not doing it on purpose and we never did,” he explains. “Look at our container division, which is generating over 50 per cent of our revenue and 60 per cent of our profit. CIMC built this division all alone. If we purchase a company, we will only choose one that is willing to adapt to our philosophy of organic growth. I am not an investment banker.”
This year, CIMC put a five year plan on the table with the 2016 goal being to become a mature global player. Step one concentrates on perfecting the product. “We want to continue perfecting what we have started and reward the staff we already have for standing by us. Our plan is to create a competitive product regarding quality and longevity.
“Step two is focused on taking over global leadership. This philosophy is enmeshed in bringing a specific product to a specific market and perfecting it, just as we did in Europe, Australia and Saudi-Arabia. Step three is creating and nurturing a business that will fit into our strategic blueprint and give potential for our staff to grow and prosper. The past taught us that the pillars of growth are customer service, staff growth and build quality. If you expected a low-budget approach, we will prove you wrong.”