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The evaluation of the development of Yuchai by Yan Ping

     Yuchai is the leader of internal-combustion engine industry in China . Its production and sales have maintained the number one in the industry for consecutively many years. The sales of its machine were at a new record of 70,000 in the first two month this year. In the beginning of this new year, we interviewed the Director Yan Ping the leader of Yuchai.

    1. Growth is the refection for the steady development of an enterprise.

    Q: How do you think of the great performance in the market and booming growth of Yuchai in recent years? Is it still upward or at point of downturn? What is the force to support sustainable development?
    A: Yuchai made a big step forward in 2006. We maintained the lead in our industry under variable pressures and tests. All sale indicators were increased. The income and tax were increased at the same time. The gross sales was 14.1 billion yuan which is 2 billion higher than the sales of 12.1 billion yuan in 2005 or up 16.2%. 23.36 million USD was made by exportation and it was 38.9% higher than that the same period of last year. The productions of all types of diesel engines were 365,000, up 29%. The sales were increased by 34.5% to 354,000. The scale of production and sales was 5 times larger than that in 2000. Diesel engine output and sales maintained a double-digits growth for consecutively 6 years since 2001. The average annual increase was over 30%. It was much higher than the growth of the whole industry. The scale of production and sales is the number one in the world among individual engine factories. Besides the incomes from producing engines, The incomes from other sections such as construction machinery, automobile parts, automobile chemical industry, and special vehicles were substantially increased. We can double Yuchai in 3 years if we maintain this growing speed.
    Here, my thanks go to the management team and all employee of Yuchai, and also goes to the government, suppliers, clients and users for their support.
    I thought that the fast growth is a normal reflection of the steady development of Yuchai. I strongly believed that Yuchai can maintain this growing momentum. My confidence comes from three major factors.
    First is to hold the diesel engine key business. It is the central target for Yuchai in the next 10 years. Our products included multiple series and wide coverage with 11 series and over 2000 kinds.
    The second is to get into the passenger car diesel engine market. It is an international trend to use diesel oil for passenger cars. Diesel oil is used over 40% cars using in Europe and that ratio is still increasing. It is still a blank In China. The annual demand of cars according to prediction will reach 5.89 million in China to 2010. Even the diesel cars only get 10% of market share it will be 600,000. This figure will be 2 million n 2015. Facing the global energy crisis and environment protection, we have the responsibility to guide and develop diesel cars market. Start from 2007 we will introduce the 4W series small car diesel engines into market.
    The third is the fast growing construction machinery market. Construction machinery is one of the few end products of Yuchai. The development of China put big demands for small excavators. Using this opportunity Yuchai concentrated and invested on construction machinery and successfully took the lead in this market. This also fulfilled the target of exporting to developed countries. In 2006, the sales of construction machinery passed the benchmark of 900 million yuan and gained over 25% market share. In order to speed up development, we increased the capital investment and increased the stocks in 2006. We got 5.5 billion yuan from H&Q Asia Pacific which is an overseas privately offered fund. The fund resolved the problem of capital shortage. Construction machinery is the 2 nd core business. Yuchai Group is targeted to be a large-scale production base with complete product series of it and will still maintained the largest production base and export base of small and medium size construction machinery in China.
    Besides the 2 major products of diesel engine and construction machinery, we will extend the industrial chain to do a better job on development of special vehicle, automobile parts, automobile chemical industry and modern logistic.
2. Words for the industry: work hard with independence
    Q: How to analyze the competitive environment? What are the advantages you have with policy, product, technology or management?
    A: China was accepted by the WTO for 5 years. In the past 5 years, domestic and overseas manufactures competed very hard for the cars and engines market. The world famous engine enterprises such as American Cummins, British Perkins, Swedish Volvo and German Deutz all came to China by joint venture, cooperative business or exclusive investment. They put huge pressures on the domestic engine manufactures.
    Yuchai, as an independent manufacture, was getting ready to take the opportunity and accept the challenge. I thought that the opportunities came from 3 factors: the first was the booming car market. The growth rate of car industry was always higher than the GDP growth rate by 1 to 1.5 percent in each Five-Year Plans. The annual production of cars would be 10 million if the same growth rate held. The number might be 20 million in 2020. The second was that the government and the society are more and more emphasized on the environment protection. The 2 leading advantages of Yuchai were engine Emission control and power proficiency. Last year China and Europe issued a schedule to implement the new emission standard. Our goal and responsibility were to protect the environment. The third was the outstanding energy saving of our products. Petroleum is a non-renewable resource. The whole world currently focused on the energy crisis. It was a requirement for us to develop the energy saving and environment protective products to protect the ecological system and save energy. We should take this mission and responsibility.
    Facing those challenges and opportunities, We found that the following areas should be emphasized: They are, First, our core competitiveness should be strengthened. The core competitiveness of Yuchai was the training, recruit and use of skilled people. In 2007, I presented an idea of construct a creative labor force in the workers conference. The idea was adapted as a major part of our enterprise culture. It is to encourage every employee to fully use their potential and emphasize the gain of personal value is one part of the realization of the value of the social and enterprise. Second, to strength our strategic coalition with partners. After ten years of incorporation and reorganization, several big companies were formed in China such as China FAW Group, Dongfeng Motor Group, Shanghai Automobile Industry, Beiqi Foton Motor and China Heavy Duty Truck to compete with the international famous car manufactures. Yuchai actively and honestly cooperates with car manufactures such as Dongfeng Corporation, Dongfeng Liuzhou Automobile, Xiamen Engineering Machinery, Jianghuai Gerfa Heavy Truck, Chongqing Hongyan Motor, Zhengzhou Yutong, Xiamen King Long, Xiamen King Dragon, Suzhou King Long, Dandong Huanghai Automobile, and Anhui Ankai Automobile on technology and services in to resolve the problems from producing whole car and to gain all-win. Third, we need to build our brand. To go to the world market, we must have our own quality products and advantaged technologies.
I have 4 words for the Chinese industry, working hard with independence. Yuchai brand is the first in the power industry in China with value of is 4.682 billion yuan. Our goal is to build a world famous brand. It is a big goal and we still have a long way to go.
    Let me detail the advantages of Yuchai. Our advantages are the following three: intelligence, product & technology, and service.
    Recruit as many experts as possible to build the great success is Yuchais view on importance of skilled people. We recruited many first class experts by individual recruit, team import, and project cooperate. Among them are Professor Zhuobin chief expert of diesel engine electric control technology and the professor in Shanghai Jiaotong University and Dr. Liqin the chief representative of German FEV engine company Beijing office and the first person who introduced the direct injection diesel car engine to China. Our strong technical and research team included 6 professors, 4 of them get allowance from the State Council, over 260 masters, and over 60% college graduates with the ration of doctors/masters/college graduates is 1/3/15. We are going to establish our own engineering institute in the first half of this year.
    About the product advantages, number one is our product structure that covers light, heavy, medium, road service and off-road vehicles; second we provide the most suitable and unique engines for users according to their different requirements and usage. Yuchai is on the leading edge on the emission control technology and have started the development of Europe-V engine. We made huge success on development and marketing of green power products in 2006 with 83 new products. Three of the new types were especially important for the development of engines. They are:
n       6L Europe-4 diesel engine: It was the first in China that used post-disposal technology and Europe-4 standard. It for the first time used the same standard with European at the same time. It was 5 years ahead of the schedule of implementing Nation-4 standard in China.
n       YC4W series diesel car engine: It was the first diesel car engine in China that has independent intellectual rights and passed the national examination in December 2006. We are the only enterprise able to develop, produce and assemble the diesel car engines.
n       6G Europe-4 gas-fuel engine: it was the first gas-fuel engine in China. The develop of this engine established our advantages and leading position in the gas-fuel engine field in China.
    Sales and service: Yuchai systematized the operations of sales and service. Our quality and main index of services maintained the leading position by the changes from emergency service to regular service and from complaints management to satisfaction management with the establishment of 1206 service stations that reduced the service radius to less than 40 km.
    Our advantages of intelligence, technology and service ensured the sustainable development of Yuchai. But there is no winner forever under the sever market competition. Yuchai will never sleep on the achievements of the past. We will keep studying, innovating, and working hard for our future development.
    3. Planning to double the size of Yuchai in 3 years.
    Q: What is the direction of Yuchai in the future? Is the enterprise at the growing period or the transforming period? What is the strategy for the future?
    A: In the next 10 years, Yuchai will work on the following: to fulfill the strategic idea of green development and all-win in harmony; to cooperate with domestic and overseas investors to speed up the import and application of high technology; to extend the industrial chain based on the main business; to emphasize on the development of diesel engine, construction machinery, special vehicle, automobile parts, automobile chemical industry and transporting industry; to integrate the technical advantages to improve the competitiveness in international market; to make Yuchai Machinery a world famous brand; and to build Yuchai to a large-scale international group.
    Our blueprint is to double the size of Yuchai in 3 years or the total gross sales increase to 20 billion yuan i in 2008. We will build our team and system for the investment and financing; set up a special company to participate in the international investment and financing business; and try to get several companies listed in the overseas stock market in 5 years. We will try to increase the export to 30% of the total sales in 5 year to fulfill our goal of internationalization of Yuchai brand, product and the production base.
    We are concentrating on our advantaged businesses beside our main business by intensifying the reform of capital structure and product structure at the current growing period. The planning and integration of automobile parts business was initiated at the beginning of last year. The Anda transmission project expanded the range of products used for automobiles. The project of Guangxi Yuchai Bright Electric Co., Ltd co-funded with Chongqing Bright Industry Co., Ltd was started. The annual output of related electric products such as automobile motors and engine starters will be over 800,000 after the projection is completed. Nanning Special Vehicle factory after reorganization entered the special car field. We cooperated with Yulin government to build the Yuchai Industrial Park. This year, the Guangxi Yuchai Automobile Parts Manufactory Co. Ltd was established and started to operate. It aims to be the biggest production base of crankshafts. It also will be the good foundation for Yuchai to become the production base of automobile assembly.
There are 27 companies under Yuchai with controlling stake or joint stock. They formed a multi-management system including diesel engine, small construction machinery, special vehicles, automobile parts, automobile chemical industry and modern logistic industry.
    4. responsibility, honesty, diligence, and preciseness
    Q: As the leader of Yuchai, how do you evaluate this enterprise your team and yourself? What is your experience about Yuchai?
    A: the rapid growth of Yucha was not a myth of me but the intelligence and strength of all Yuchais employee. Yuchai set an impossible goal of 13.8 billion for the year of 2006 which was 14% higher than previous year after 5 years of rapid growth. The total gross sales reached 14.1 billion yuan for the past year and the sales of products were higher than the annual target of 320,000 to 360,000. They were the achievements of our whole creative work. We made many successful from practice and exploration of the past decades. The biggest success was that we built an excellent team with diligence, hard working spirit, intelligence and creativity. This team guaranteed the continuing development of Yuchai.
    As evaluating myself, I think we should leave it to the others.
I have been working in Yuchai for almost 2 years after got into Yuchai in May 2005. Responsibility, faithfulness, diligence, and preciseness were my summary for Yuchai. I grew up in Yuchai. I have deep felling of it. I have been thinking how to make Yuchai bigger and stronger and how could I do for the development of our national industry after I came to work in Yuchai. The heavy responsibility and the deep feeling gave me the best motivation power and keep me moving forward all the time. The development of Yuchai was heavily depended on technology and management because of its intensive technology business. We must concentrate our efforts on the improvement of technology and the scientific management. It is the way to make a bright future for Yuchai.
    5. There is no fixed model for doing business and the best thing is innovation.
    Q: Although you kept a low profile to be the leader of Yuchai, we still heard about your idea of new Yuchai, new thinking and new development. Would you tell us about your ideas of management and innovation?
    A: As the biggest engine manufacture in China, We must take 2 responsibilities: first, to be the controller of the biggest movable pollution resource in China; second provide green power for the development of China. The idea of innovation is mainly for improving the ability of independent innovation and building our national brand. We must work hard on many fields such as brand construction, quality management, cost control, marketing, and the enterprise culture. There is no fixed model for doing business and no business mode is the best or the most scientific.  The ideal business mode is only if it fits the practical situation and power the good development of the enterprise.
    I made some reforms to the company after came to Yuchai and careful studied the company system administration and regulations. The reform mainly was to improve administration structure, integrate resources, normalize management, and encourage people. The reform has got remarkable effects on the high efficient, normalized and stable operation of the Group. Scientific, normalized, flexible and high efficient were my basic management requirements. Facing the sever market competition, we need to improve the overall benefits; build harmonious environment; and improve the working efficiency, product quality and service quality by exploring our potential; fully use our advantages; use existing resources wisely; increase income and control cost.
    Using the channels such as bank loan, debenture, bringing in new industrial shareholders or financial shareholders, and expanding the stock to broad the financing channels is a major task in 2007. Our investment and financing platform is going to be established by the first half of this year. The investment and financing work for all companies and subsidiary companies of Yuchai Group will be managed by a single department.
                                                                                                     (writer: Yangqing)
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