from nothing to a profitable wholly owned foreign investment enterprise in runzhou, zhenjiang, china...

From nothing to a profitable wholly owned foreign investment enterprise in RunZhou, Zhenjiang, China in 250 days.

Tenacis Inc.Real Estate

White Drive Products GmbHEurope Sales & Distribution Center

Global Logistics CenterConsolidated shipments

Hopkinsville USA

WH Manufacturing Inc.Hopkinsville KY USA

White Drive Products IncGlobal Sales, Marketing,

Engineering & Testing

White (China) Drive Products Co. Ltd

Zhenjiang China Manufacturing

White Drive Products Hong KongAsian Sales & Distribution Center

LessLabor Inc.Automation

Manufacturing

Propulsys IncHolding Company

World Headquarters

Hopkinsville, Kentucky,

U.S.A.

Core Products

Gerotor Hydraulic MotorsLow speed High TorqueA lot of power in a small package+/- 80% efficiency

Hydraulic BrakesIntegrated with the gerotor hydraulic motorStand alone operation

Production demands precision engineeringVery tight tolerance machining typical 2/10,000

inch(40 times smaller than the thickness of a typical

black human hair).

Hydraulic Gerotor Motors

Hydraulic Brakes & Integrated Motor Brakes

Where are these motors and brakes used?

Mobile Equipment is the largest sector.

It is hard to go through a day where our products have not had an impact on your life in

some way.

Aerial Work Platforms

Agricultural Equipment

Concrete & Paving Equipment

Construction Equipment

Cranes, Winches & Utility Vehicles

Lawn Care Products

Why China?Why China?

Chinese domestic demand:a. Already the largest market in

Asiab. Forecasted to double in size in

the next 5 yearsc. Industrial & Service infra-

structure supportd. Chinese competitors were

already emerging

Propulsys – China Strategy

4 key strategic reasons for Propulsys to opening a company in China:

Participation Access Capacity Expected

Establishing a company in China

Acquire an existing Chinese company: Hard to find a good one that wants

to sell right now! Who are the current owners? Takes a great deal of time and will

not necessarily fit!

Establishing a company in China

Form a Joint Venture partnership:Very difficult- many cross cultural issues cloud the

opportunities We tried……

• We established a supply agreement with a Chinese manufacturer.

• We established a good relationship… • We greatly exceeded forecasts.• 18 months of dedicated and supportive

negotiations to establish a J/V to manufacture additional new products.

Failed….January 17, 2005• Failed because the Chinese major stake holder

did not want the control of the shares and votes and investment….

• But, wanted control of his “destiny”…wanted to do it his way!

Establishing a company in China

Create a new company in China

Challenging in a country with such a long cultural history.

Administrative challenges Language barriers But, we had learnt a lot

Where do you begin?

Critical factors to be considered :Resource availability:

Industrial LandSkilled work forceGood infra-structuresEnergy supplies

Attitude of the local government to new businesses

THIS MOST IMPORTANT

Why RunZhou, Zhenjiang, Jiangsu?

Location of Zhenjiang City and the district of RunZhou.

RunzhouRunzhou

NanjingNanjingShanghaiShanghai

Yangtze River delta is one of the machinery centers of both China and

the world

Zhenjiang has a population of Zhenjiang has a population of 2.89Million2.89Million

Zhenjiang a city

with over 3,000

years of history.

Zhenjiang cultural heritage

Zhenjiang Infra-Structure

Zhenjiang is pivotally located with a highly developed infra-structure, including a deep sea port.

Bridging north & south China across the mighty Yangtze River

UTILITIES

ABUNDANT SUPPLIES of ELECTRICITY, GAS and WATER

Zhenjiang Education System

6 universities

9 professional colleges

14 adult education schools

Annually:

20,000 qualified technical graduates 210,000 student graduates

Resource availability: Industrial Land Highly available and well located Skilled work force Plentiful & skilled at all levels Good infra-structures Good and getting better

every day Energy Well planned energy resources, with daily

availability. Attitude of the local government to new

businesses We traveled China in search of the right location,

Beijing…..Jinan…..Wuxi…..Suzhou..…Shanghai….. Ningbo….. Guangzhou…..Shenzhen and more.

Zhenjiang & RunZhou Governments offered the BEST new business investment environment.

Why Runzhou, Zhenjiang, Jiangsu?

If you learn nothing else from my presentation….please learn this!

The key to success in ChinaIs not your investmentIs not your productsIs not your designs Is not your production techniques

It is RELATIONSHIPS!50% of your executive manager’s

time will be absorbed in building and sustaining relationships

Key objectives established at 1st meeting with RunZhou District

Government . Day 1 - January 24, 2005

• Conclude negotiations with the Chinese authorities to:– Establish a Wholly Owned Foreign Investment Enterprise. – Target April 30, 2005

• Maximize incentive and tax benefits for 5 years & beyond– Target April 30, 2005

• Obtain Business License– Target April 30, 2005

• Conclude Land Use Contract– Target April 30, 2005

• Establish bank accounts and financial relationship– Target April 30, 2005

• Selection and appointment of critical managers– Target May 15, 2005

• Take “possession” of the land– Target May 31, 2005

• Construction of 92,000 sq ft building to be completed by September 30, 2005

• Commence production November 1, 2005

White (China) Drive Products Co. Ltd.Business License issued April 28, 2005

Ground Zero May 2005

Foundation Stone Laying Ceremony June 8, 2005

Unshakeable Foundations… like the Great Wall of China

Progress….. Late August , 2005

The building contractors have gone……October 2005

WCDP Electrical Sub-station

Heat Treatment

Production EquipmentOperating 24/7

Wash, Dry and Paint Operation

QMS Equipment

Test Lab and R&D Center

The first BK10 Hydraulic Brake January 6, 2006

Cost of Operating in China

Utility costs

Electricity: $0.05/kw/h

Water: $0.28/m3

Gas: $0.30/m3

Material Costs

Typical savings versus the same or similar material in USA

45+%

Because we are a Chinese company

design engineer

skilled worker

technical operator

middle manager

senior manager

$2000

$3000

$6500

$5000

$10000+

HUMAN RESOURCE COSTS PER YEAR

Company Vision

Conduct Research and Development, Manufacture and Sale of:Advanced technology multi-disc

integrated and non-integrated brakes.New generation of gerotor motors

using state of the art materials and process technologies.

New generation of steering units using state of the art materials and process technologies.

Company Mission

WCDP will design, develop and manufacture

1. World class quality products2. Sell them at competitive prices 3. Be the worlds lowest cost

manufacturer of these products.

Managing a Chinese Company

Traditionally foreign investors make one of two choices in the management of their Chinese company:

Employ expatriates as their senior managers Transfer the “corporate” management skills Transfer good and bad habits Transfer this is the way we do it in …….

Result: An American managed company in China, and loss of gains to

be made through synergies of Chinese and American techniques & management style.

Employ only Chinese

No transfer of corporate management skills Only Chinese good & bad habits Very poor inter-company communications

Result: A Chinese Managed company with NO synergies

ORYou can choose to develop a cross cultural

management team to take the best of both cultures!

Senior Managers

Jennifer ChenV/GM Operations & Sales

Paul ChenV/GM Employee Development

Dr. John ZhangEngineering Manager

Mike YuanFinance Manager

Developing our company culture

WCDP takes the wonderful 5,000 years of Chinese culture and blends it with the best western practices and management techniques to create our own culture.WCDP is different… unique.. Members of a new order.

The WCDP culture Equal opportunity is given to every employee. All employees are given the opportunity to

develop and grow. There are no limits… all employees can be as

good as THEY want to be. All employees strive every day to be the very

best. WCDP rewards those who make significant

contributions WCDP has established a team environment, with

every team member accepting their responsibilities as members of the WCDP team.

4 Strategies of Operational Excellence that position our Chinese plant as a

world leader1. Customized and system controlled

manufacturing, using state of the art ERP technologies

2. Lean manufacturing technologies to achieve a production velocity of 10 days.

3. Utilize new technologies and materials to achieve lowest total production costs

4. One piece flow – not just batch production, but meeting the needs of the customer

Information Technologies Strategies

Integrate WCDP into corporate wide global ERP system and 24 hour 7 days a week intranet capabilities, using latest technologies and systems.

• Access to all data bases in Mandarin to facilitate knowledge driven decisions.

• Flexible hardware and software systems that are rapidly expandable and support double digit growth

• Application of customized ERP technology to speed up the manufacturing cycle to:

» Optimize equipment utilization» Minimize inventories» Maximize productivity

• Quality Management integrated into the total ERP system

Manning Plan

WCDP:Current Plan

Has a well defined development and manufacturing program

Current Products

BK10 Multi Disc Brake SB Multi Disc Brake WR Motor

Future Plans….

Propulsys believes it is uniquely positioned:

Many companies including Fortune 500 companies recognize the need to be in China, but:

Lack the knowledge and skills to establish a manufacturing and or logistics operation in China.

Do not understand “how China works” Do not have the government contacts Are afraid of the unknown and distrust the

Chinese Top executives are not prepared to spend the

time in China working through these issues Have great concerns about systems

integration

Future Plans….

WCDP has the capability of addressing all of these issues and concerns.

Propulsys Inc. is prepared to invest more to expand and diversify when the opportunity arises.

WCDP has firm options with RunZhou Government that will triple the land area.

Future Plans

WCDP will offer to third party companies:

Strategic Partnership Relationship to design, develop and manufacture: Finished Products

Major sub-assemblies Metric designs

Chinese materials and components.

What are your plans for the future?

If China is in your future, now you have 2 new possible investment opportunities:

1. A strategic partnership with WCDP or,

2. Directly with the RunZhou Government

Can we help you?