Industries have always been watching Yuchai ever since Yuchaibecamea leading enterprise for the internal combustion engine. When the director was changed last year, people couldnt help but pay more attention to Yuchai and its development. In 2005, while the performance of the whole industry was going down, Yuchai managed to keep a double-digit growth. However, many people did not acknowledge this achievement. They thought the new leader was just trying to get promoted, and they were doubtful about whether Yuchai could remain in the lead in 2006.
When the 2006 performance resultsshowed up , the peoples doubts were relieved .
Compared to 2005, the Yuchai Group sales increased by 2.1 billion Yuan, and the production of diesel engines increased by 110,000 pieces. This growth speed was incoomparable in the industry.
Now, Chinas economy has entered an era of meager profits. On one hand, the market is keen on keeping prices competitive, and so Yuchai is forced to keep reducing prices for downstream host factories. On the other hand, however, the upstream suppliers continually raising the prices, so how can an enterprise survive in such a situation?
In recent years, as our countrys economic structure deals with the adjustment of the dynamic business environment, more and more negative factors influence companys control costs. For any enterprise, a big issue is having effective financial control..We all want to spend less money to accomplish given tasks. In the past, Yuchais financial restrictions on product and sales management has being rather lenient. Recently, the price of producing materials such as steel, coal and oil has risen to record heights, and the enterprises are facing serious problems with money management. If Yuchai continues to spend money without restriction, it will lose a great amount of profits.
In 2006, Zengshiqiang, the assistant director of Yuchai Corporation, was assigned to take charge of controlling the corporations funds.. Due to the loose management in the past, he has found areas to lower the costs efficiently, allowing him to serve the task with confidence and optimism. The first step was to decide what percentage of the funds needed to be reduced according to the calculations and analysis of the historical data. Then the task is split between each project, section and department, and finally they are implemented. Every section and department contributed to fulfilling the task of cutting down the costs.
In Yuchai, a project called Cost Control was introduced with an incentive scheme to gather ideasfrom all members. In less than half a year, there were over 100 applications competing for the Cost Control performances prizes. The corporation implemented order-oriented management to process production, which effectively solved the past overtime work problems and excessive inventory management. The sales system actively controlled managing orders, and so predicting sales became more precise. The ratio of sales rose monthly, and the complete inventory of machines and receivables decreased by 21% and 10% respectively. The departments of production carefully carried out the order-oriented system, organizing the production in a scientific manner, and with the same salary, the workers gained 26 more vacation days, which saved about 5.2 million Yuan on the overtime payments.
In 2006, the Cost Control Project contributed vastly profit growths, but to maintain these achievements, an operational system that could quantify and evaluate performance was required. And so,training poeple for the middle and high-level administrators became a priority.
The training turned out to be quite effective and only sophisticated and executive people who know how to combine the short-term achievements with long-term benefits came out from this experience. produced were In Yuchai, from this group of experts, in charge of the training personnel, planning and supervision is Vice president of the Group, Liubiqing.
The purpose of the training was very clear. To reinforce the awareness of innovation, improve management skill and efficiency, as well as integrating theory into practical work to achieve better performance. The training helped to increase the quality and efficiency of work while also correcting the working environment. At the same time, costs were still being reduced, showing the success of a well implemented idea of improvement, and reducing production costs. .
In 20 years, Yuchai has developed from an unknown small enterprise to the leaders of the industry. Compared to others of the same industry, Yuchai has no advantages geographically or economically. Yet even through some tough times, when the whole industry was going down, Yuchai managed to keep an on-going development . What is unique about Yuchai?
First, there was an obvious phenomenon happening in the domestic engine industryand that was that any large engine enterprise in China had to be dependent on a host machine factory, such as Shanghai Automobile for Shanghai Diesel Engine, Heavy Duty Truck for Weichai, FAW for Xichai, and Dongfeng for Chaochai. The engine is, after all, only an intermediate product be paired with a host machine, and so it was easier and safer to partner up with a big host machine factory. Yuchai is different, because it is an independent enterprise, has allowing it to strengthen its force in the competition.
Yuchai has produced a sales and logistic network to provide third-party services. There are now over 40 subsidiary companies, more than 1000 delivery centers, exclusive stores, terminal service points, and 6 overseas sales branches. As Yuchais philosophy of management and services matures, in addition with the advantages of a sales network, Yuchai has proved its competent enough lead the market.
The deputy director of the corporation, Wuqiwei thinks that its a good idea to contact the end users, provide advisory service for them, and let them get to know what the engines quality guarantees. Thus, these end users may request that the host machine factories assemble Yuchai engines for them. Depending on the sales network, Wuqiwei, as the director of Yuchai led the company to have a rapid growth in 2006, and the sales reached 900 million Yuan, ranking 2
nd in the Group after the construction machinery company ,setting a new milestone for the group.
Second, Yuchai always pursues prominence, focusing more on research and development in order to stay ahead of others. Yuchai has a group of first class experts, including Professor Zhuobin, the top expert of the internal combustion engine in China, Dr. Liqin, the chief professor at Shanghai Jiaotong University who researched in Germany for 20 years, and finally over 20 Doctors. They bear the huge responsibility of independent innovation, and have developed several new types of engines for buses in the city in these 2 years. In 2004, Yuchai participated in a public bidding of the Europe-3 vehicle in Beijing, and for the first time competed with the oversea brands like Cummins and Iveco in competitions sited in the Shenzhen and Guangzhou markets. On February 26, 2006, the 1000
th Europe-3 engine was produced, and in the same year, Yuchai successfully developed the first diesel engine China that reached the Europe-4 standard, advancing the schedule by 5 years before the government would implement the Europe-4 standard. At the same time Yuchai had also developed the YC4W diesel car engine with complete independent intellectual rights, becoming the only enterprise in our country that can produce diesel car engines.
Yuchai has a unique platform of innovation. Beside the team of top experts and technical force, Yuchai has the best National Technical Center of the engine industry, which was built with 400 million Yuan, and listed in the Top 50 technical centers in our country. There are 23 general labs and 8 special labs in the center.
Third, as an independent engine enterprise, Yuchai can develop rapidly even while the whole industry is going down, because Yuchai has multiple branches of products available to meet the demands of the market. In the past, Yuchai suffered from the production of only monotonous products so facing the great profits of heavy machinery and big market of light machinery, Yuchai could only bemoan its inadequacy. Since 2005, Yuchai has developed multiple series of engines to match the trucks, buses, light vehicles, and construction machines. The application of YC6M fills up the void of matching for trucks, and the development of YC4F has led Yuchai into the market of passenger buses and light trucks.
With the expansion of multiple products, Yuchai now has 11 different types of engines with over 110 types and more than 3000 transformed.
Of course, the transformed product is a double-edged sword because while it can meet the demands of various different customers, it also can raise the price. Liangheping, the vice president whos in charge of technology, thinks that in the future the products will be more diversified and professional in order to meet the markets demands, and Yuchai ,in order to stay ahead in the industry, must emphasize that controlling the companys costs should be in dealt with in the next step.
Where is the future
2006 is particularly meaningful for Yuchai because not only did the Yuchai people participate and witnessed the development of their enterprise, more importantly, they recognized and accepted the new director, Yan Ping.
After 20 years of a dynamic history, 6 years of continuous growth, Yuchai is now unquestionably the leader of the engine industry. In recent years the whole industry has had a hard time, but Yuchai has kept stable growth, though much slower compared to the big jump in the early 1990s. After a decade, Yuchai is preparing to fly again by transforming Yuchai into a world famous, multinational group.
To achieve this big leap, the primary obstacle is financing. Looking into the history, Yuchai developed fastest in the last century which was caused by the infusion of large sums of money. During the 7
th 5-year Plan, Yuchai obtained a big investment of 28.15 million Yuan from the country, and then invested 100 million Yuan, which greatly improved the production capability and made a solid foundation for development. In 1992, Yuchai Corporation raised 240 million Yuan from corporate shares from domestic non-private companies and three foreign funded enterprises In 1993, Yuchai set up a joint venture enterprise and acquired over 50 million US dollars from the foreign company; in 1995, Yuchai raised 65 million US dollars from the USA market through indirect oversea IPO; so in total raised 1.2 billion Yuan.These funds supported 6112 projects of engine development, the advanced imported Ford production line, and caused the first historical jump of Yuchai. Its regretful that Yuchai missed a good chance in 2003 due to conflict with the foreign partner, causing Yuchai to be unable to raise 150 to 200 million Yuan at that time .
In 1993, the joint-venture company Yuchai Machinery Co., Ltd was established, and the infusion of a foreign capital brought vigor and activeness to the enterprise. In 1994, the Yuchai Group made a Golden Share agreement with Hong Leong Group of Singapore, in order to reach a IPO on the New York stock market, but now this Golden Share agreement has become a restriction for Yuchai to finance in the capital market. Since 1997, Hong Leong has rejected plans of developing new products and improving the technicians welfare many times, and that conflict gradually surfaces.
Now, Yuchai is restricted by the cooperators to raise funds for its main business, and has to find breakthroughs from other fields. After Yan Ping took over , his first action of capital operation was to cooperate with H&Q Asian Pacific, and lay emphasis on the construction machinery market. In 2006, H&Q Asian Pacific invested 45 million US dollars to get 43% shares of Yuchai Construction Machinery Co., Ltd. Yuchai could use this investment to expand production and promote technical innovation, and would manage to initiate the oversea IPO procedure in 2007 to raise 500 to 800 million Yuan for development. Other prospective sections such as the Yuchai Logistic and the Yuchai Gaorun will also start to be financed one by one.
How to operate the capital for the main business? How to break through the restriction of Golden Share privilege? How to get Yuchai listed as a whole entity? These are questions for Yan Ping to think about.
Beside capital support, Yuchai still need government support and cooperation from the outside environment to become a large-scale multinational group. Will this wish ever come true? Yuchai once planned to re-move to a better location, but now the leaders of Yuchai have discarded this idea. They think the city of Yulin is a good place for development, due to the improvements in the traffic and environment are. In 2006, the sales company moved back to Yulin from Guilin, and this should be seen as a discreet contraction. Where is the future for Yuchai? To go out, to stay, or find some other way? We cant make a conclusion yet.
(writer:Wangqinglin and Yinhaiying)