Leveraging the “One Belt and One Road” Weichai takes the first step

With the “Belt and Road” concept borrowing from policies, companies focused on the entity began to prudently promote the implementation of the national strategy. This is an indispensable process—the company’s major strategic layout needs to be done first for market due diligence and then implemented and implemented. It is impossible to be done overnight.

"China's 'One Belt, One Road' strategy supports two directions: interconnection and capacity cooperation. What we can do now is capacity cooperation. The 'Belt and Road' initiative can drive the sales of our products. Productivity cooperation is our pursuit." During the interview, Zhang Gengsheng, head of Weichai Power's international business, stated that as a pioneer of the “One Belt and One Road” strategy, Weichai has already started the international market layout and achieved early results. In his opinion, there are several ways to export the production capacity. One is mergers and acquisitions, the other is the establishment of factories, the third is the technical output, and the fourth is the establishment of joint ventures. Now, Weichai's mergers and acquisitions in Europe and America have been perfectly finished. Under the new national strategic opportunity, Weichai began to build factories in India, exporting technology to Ethiopia, and exploring cross-border joint ventures and factories.

The Merger and Acquisition and Development of "One Belt and One Road"

The strategic conception of the “New Silk Road Economic Belt” and “21st Century Maritime Silk Road” proposed by China is a grand strategy for the integration of non-maritime and terrestrial economies in Europe and Asia. In this land and sea map, there are many business opportunities that the industrial and commercial enterprises have dreamed of.

"Going out" has become a new trick for many companies. In addition to relatively simple export trade, more companies are contemplating cross-border mergers and acquisitions or setting up factories overseas. They are quickly entering the forefront of the market like those of typical successful mergers and acquisitions.

In fact, after the outbreak of the global financial crisis, Chinese companies opened the prelude to “bidding” transnational mergers and acquisitions. But today, after five or six years of scouring, there are only a handful of successful multinational mergers and acquisitions. Weichai is one of the winners.

From 2009 to 2012, Shandong Heavy Industries Weichai Group has acquired France Baudouin, Italy Ferretti, Germany Kion Group and Linde Hydraulics. "At present, these acquisition companies and Weichai have achieved resource sharing and developed in a coordinated manner." Jiang Kui, general manager of Shandong Heavy Industry Group, said recently.

Talking about the process from early market due diligence to the signing of M&A agreements and integration with domestic companies, Jiang Kui frankly stated that the differences in financial statistics systems, corporate governance structures, and corporate cultures between countries are huge challenges for cross-border M&A. The running-in process is not achievable by all companies.

Jiang Kui explained KION's corporate governance structure and compared it with Weichai's corporate governance. There are many differences between the two. For example, the division of work between KAO's board of supervisors and executive management clearly does not coincide; and Weichai’s executive directors are on the board of directors. And hold concurrent positions in management. The supervisor of the supervisory board of a German company, whether it is from shareholders or labor unions, uses its own name to independently make decisions and personally assume legal responsibilities instead of performing duties on behalf of the shareholders. This is very different from that of listed companies in China. In terms of management's rights and obligations, domestic listed companies are generally not regulated, and there is no need to report to individuals based on their business conditions and needs; and KION’s executive management holds a meeting every 14 days. The CEO must regularly report to the chairman of the board of supervisors. Company operations. The rights of the board of supervisors are also different. The board of supervisors of domestic companies has only the supervisory power over the board of directors and has no power of dismissal; the board of supervisors of KION has the right to supervise the appointment and removal of executive management.

“There is no single, best model for corporate governance. The human factor is fundamental.” Summarizing the governance experience of overseas companies, Jiang Kui believes that the key lies in adapting to local conditions and governing according to law.

In order to cross cultural differences, Weichai has adopted a variety of methods to allow employees of M&A companies to understand and recognize the cultural connotations of different regions in their personal experience. As in September last year, Weichai has temporarily modified the conference room of the Informatization Building into the China Pavilion, the German Pavilion, the Italian Pavilion, the Forklift Museum, the Engine Pavilion, and the Truck Pavilion. Among them are Chinese Kung Fu tea, kites, and calligraphy, and Germany’s football culture. Beer, Italian cuisine. The CEOs of Weichai Power's subsidiaries from around the world, while experiencing different cultural elements, explained their understanding of Weichai culture—harmony, responsibility, and tolerance. Tan Xuguang, chairman of Weichai Group, who participated in this event, said that in the collision of activities, each CEO further unified his thinking and will undoubtedly accelerate the international development of the group.

Building factories across international boundaries, transforming into technology output

When talking about the overseas market under the new normal, Zhang Gengsheng said outright that he faces two major problems. One is the appreciation of the US dollar and the other is the devaluation of the yuan. This has caused the traditional markets in Southeast Asia, the Middle East, and Africa to begin to shrink.

According to Zhang Gengsheng, in order to avoid the impact of exchange rate fluctuations, Weichai began to transition from a simple product export to a platform construction. It is preparing to build 8 ABOs overseas. At present, it has built 7 and the Latin American market is under construction. ABO has offices and factories in major markets to achieve local production.

It is understood that Weichai India officially started production in November 2014 and it is currently prosperous. The company's flagship WP10/12 engine is favored by local customers. Currently, it is mainly engaged in shipboard power and industrial power products. This is a test field to test Weifang’s internationalization capabilities and is also a bridgehead for Weichai to develop overseas businesses.

“India’s first-phase production capacity was 10,000 units, with an output value of nearly 100 million U.S. dollars. It has received strong local support and promoted local employment,” said Zhang Gengsheng.

The start-up of the Weichai India company is a turning point for Chinese engine companies from the introduction of foreign advanced technology to export technology, and it is also a qualitative leap for Weichai International to upgrade from general trade to overseas construction.

The Indian company is just the beginning of the output of Weichai's technology. Zhang Gengsheng told the reporter that technical output is an important development direction for Weichai in the future. Weichai is currently exporting technology to Ethiopia and Myanmar. “The other side engages in manufacturing. We give licenses and provide technical support.”

“As a model of high-end manufacturing in China, Weichai will benefit from the “One Belt and One Road” in the future, as China’s capital goes out of the country and further expands its overseas markets,” said CICC in its recent research report.

In fact, the "going out" of the "One Belt and One Road" strategy has far more significance than the business opportunity itself. Regardless of whether it is setting up factories overseas or exporting technology, this kind of transformation and exchange not only converges advantageous resources in the tension of competition and cooperation, but also builds new platforms and channels, expands new markets, and crosses the laws and systems between national boundaries. Culture, and even exchange rate barriers, spread the Chinese manufacturing model as well as Chinese culture and ideas and promote economic and cultural integration beyond commercial exchanges.

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