01/21/2003
China Daily: Liu Bian

Western management is often resorted to as a last ditch attempt to pull many a State-owned firm out of the quagmire of financial loss.

However, in Changchun, Northeast China's Jilin Province, a Chinese manager has successfully turned his company - an auto glass manufacturer which had been in the red for years - into a profit-making enterprise.

And this very goal was what his British predecessor had hoped, but failed, to achieve.

The company, Changchun Pilkington Safety Glass Co, reported sales in excess of 100 million yuan (US$12 million)and 13 million yuan (US$1.6 million) in pre-tax profit last year.

This compares with annual losses of 3 million yuan (US$361,000) before 1996.

Actually, Changchun Automobile Safety Glass Factory, as it was then known, had been a loss-making firm for years and was on the verge of bankruptcy in the early 1990s.

Then in 1995, the Changchun municipal government decided to bring in foreign investment and management to save the ailing State firm.

Later, a joint venture between global auto glass giant Pilkington, Shanghai-based Yaohua Glass and the Changchun company was established.

Pilkington invested a total of US$7.5 million to hold a stake of 50.5 per cent in the joint venture and sent a British manager as well, hoping that western management could help reverse the loss-making trend.

However, British-style management, while introducing some quality and technical standards to the company, failed to lift it out of financial inertia.

In 1995, the first year of the joint venture, the company lost another 3 million yuan (US$361,000).

In early 1996, the British manager resigned.

"The investors soon lost confidence and regarded the investment a total failure," a company official recalled. "Workers were also very pessimistic, seeing bleak prospects for their firm."

Later the board of directors appointed Xin Shoushuang, a veteran technician in the field who was then working for another glass factory, to be general manager of the company.

The coming of Xin, and especially his management philosophy, added vitality to the firm, which has witnessed fast growth in recent years.

The downward trend came to a halt in 1996 when the company's losses had improved to less than 1 million yuan (US$120,000).

This encouraged Pilkington to invest another US$3.2 million in the joint venture.

By 1997, the company's account books were finally in the black. Over the past six years, the company has reaped profits totalling 28 million yuan (US$3.4 million).

Glory goes to contracting system

Both Xin and his colleagues attribute the fast growth to the responsibility contracting system introduced by Xin.

Under such a system, all the equipment, working procedures, production indices and services were divided into contracting units and every worker, division chief, workshop director, and even high-ranking managers in the company, contracted for their responsibilities.

Their income was also closely linked with these responsibilities.

"The system boosted employee enthusiasm," said Wang Yunqi, director of the administrative office of the company. "In our company, a traditional Chinese firm, such a system is more effective than that of British-style management - which failed to excite our workers but instead relied heavily on workers' conscientiousness.

"From this standpoint, the British boss was not familiar with the real situation in China and the working style of Chinese employees," he said.

When the system proved successful, the company decided to broaden it from year to year, Wang said.

"Everyone in the company, from high-level managers to workers, wants the system to be carried to its fullest extent," he said. "The benefits are visible - the company is making profits, workers' incomes keep increasing and prospects look very bright."

However, Xin himself believes that the most effective part of his development strategy has been "expansion through high quality, rather than quantity".

"I do not like blind expansion," Xin said. "Over-expansion only leads enterprises down a dead end.

"I believe in quality as the only factor which can support our enterprise to maintain an invincible position," he said.

Quality standards are laid out for each step of the production procedure.

Quality is also one of the most important indices by which efficiency is evaluated according to the responsibility contracts signed between the general manager and workshop directors.

Strict management helped Pilkington pass a series of quality system certifications and examinations.

Last February, it won VDA6.1 and QS9000 international certificates from Germany. In March, the company passed an examination conducted by the State Safety Glass Certification Centre.

It also passed inspection by auto makers such as Geely Group and FAW Volkswagen last year.

The high quality of its products helped the company to win more customers last year when it clinched deals with several new customers such as Shaanxi Automobile, Anhui Automobile and Beiqi Futian Automobile.

Changchun Pilkington has also been aggressive in the international market.

Last year, it exported 360 million yuan (US$43 million) worth of products to Europe and the United States, up 20.67 per cent from the corresponding period last year.

Now, exports contribute about one-third of the company's total revenue.

Xin also placed much importance on the development of new products.

In 2002, 834 new products were created, which helped the company reap sales revenue of 6.07 million yuan (US$731,000).

"Never stop exploring" is Xin's motto.

After successfully turning around a loss-making firm in Northeast China - where poorly-performing State firms have become heavy burdens on local economies and resulted in millions of lay-offs - the general manager is now attending MBA courses at Jilin University, with the aim of bringing more advanced management know-how to his company.