"A company can only be successful by providing more value to its customers than does its competitors. Value is Quality, Service and Technology. The company also has to provide this value to customers at a cost level that ensure profitability and provides a reasonable return for all investors in the Company." Gary Riley, president and CEO of ASIMCO Technologies Limited, one of the largest and independent components manufacturers in China, explained these words as his leadership philosophy to his employees.
Gasgoo.com: Can we start from the reason for executive changes of ASIMCO? What's your leadership philosophy?
Gary Riley: Jack (Perkowski) has been CEO of ASIMCO for quite some time, and as the business environment and overall economical conditions have changed, so the Board decides to change. They decided to find somebody to sustainably run the company, manage the business, focusing on operation improvement and excellence.
Before I came to ASIMCO, I have been working as CEO or COO, so I have a lot of experience in starting a factory, managing a factory through all the difficulties into a group. And these running and managing experience is just the Board wanted; they don't want the Wall Street influences. They want somebody who has experience in details of running a business—this is the only reason for the change. They feel they have to change the direction.
In the letter I wrote to ASIMCO employees, I explained my leadership philosophy—"A company can only be successful by providing more value to its customers than does its competitors. Value is Quality, Service and Technology. The company also has to provide this value to customers at a cost level that ensure profitability and provides a reasonable return for all investors in the Company."
Gasgoo.com: During the past years, ASIMCO has been pursuing an aggressive growth strategy in order to expand its market presence and broaden its technical capability/capacity. As the overall market now changed, is ASIMCO's development policy also changing?
Gary Riley: The current focus of our business is on quality of all our operation and products, and improvement of the technology level of our products, including introducing foreign experts. I'm looking inside the company to give our customers more value, rather than just growth. We expect to grow organically, not through acquisitions.(so it means that you won't be as aggressive as before any more?) Our operational improvement will be much more aggressive; I don't see much plan to make acquisitions in the coming few years.
Gasgoo.com: ASIMCO has an extensive manufacturing base of 17 facilities and 52 sales offices in China, how are these plants running? What about the one bought from Federal Mogul several years ago? Jyonetsu monozukuri
Gary Riley: You mean the camshaft plant in Yizheng (Jiangsu)? The way we deal with it is to have new projects and bring in new customers. We're awarded new projects for two global diesel engine manufacturers which have been launching this year; we’ll supply their operation in China while some of the business will be exported. One customer is from North American and the other is from Europe.
Many of our Operating Companies are experiencing rapid declines in orders, some up to 50% declines in Q4 sales and orders, compared to Q3 last year. Also, many of our customers are taking dramatic actions to reduce their inventories in reaction to the slowdown in their business. This was also negatively impacting our business. We had some layoff to align our capacity with the demand, but we expect the business to recover in the second quarter.
I'm looking at the down market as an opportunity to improve our company and we're working hard on—
●Inventory and production level management, analyzing our inventories and adjust our production schedules to achieve our goal of making the inventory turnover to be 10 for 2009;
●Study every production process to fix problems that have lead to poor product Quality in the past. Lean manufacturing and 6sigma projects should be launched in each company to simplify production processes, improve maintenance of equipment and improve process capability;
●Implement retraining programs for our workers and managers to teach Quality fundamentals;
●Re-assess our investment and capital spending programs for 2009 to ensure we spend in areas essential to improve processes and Quality first. Reassess all increases of production capacity by considering the reduced demands for our products from our customers;
●Reassess our product development plans to ensure we are developing products that will provide long-term strategic advantages to our Customers, and thus to ASIMCO;
●Work with our suppliers to jointly reduce the costs of our raw material purchases.
Gasgoo.com: You mean ASIMCO's business will revive in the second quarter? How about the overall market?
Gary Riley: That’s about our own business: we expect to see Q2 is better than Q1, Q3 is better than Q2 (but this depends the individual customers we serve and products we have). We've talked with many automotive companies, some of the diesel manufacturers are positive…being optimistic or pessimistic depends on whether you have new projects. The general market may recover in the second half (as some say), but we see our business to recover sooner than that. Our business is more domestic-led than export related. We think the domestic demand will recover sooner than export to overseas markets.
What I heard of the domestic commercial vehicle market is from a small increase to a 25% decline, what we see is from a 2% increase to a 5% decrease for the year. The commercial vehicles include several categories, on-highways and off-highway engineering equipments. We see a slower demand in on-highway commercial vehicles while an increase in engineering equipments, as the 4 trillion Yuan stimulus package by the central government will focus on domestic investment and spending. They'll build the infrastructures—the highways, buildings and so on. All these need heavy duty trucks and engineering equipments, thus will spur the demand of diesel engines.
Gasgoo.com: Are you going to cut out some non-core business?
Gary Riley: That’s what we're always looking at in terms of our strategy. It's up to our customers and where we can be good. If we can't make ourselves be the No.1 or No.2 of the market share for each company, then we're looking to change. We'll see if we have any chance to be No.1 or No.2. After the assessment, we'll then decide where we will go forward.
We have lots of business, while our key business is in the heavy duty diesel market, so we make our products to support that market and add value. The other two markets—international market and passenger vehicle market—in the passenger vehicle market, we have several companies and most of these are doing export business. Those are the markets we serve, not necessarily the products. We have multiple products to serve all the three markets.
Gasgoo.com: Is there any synergy between these three parts of business?
Gary Riley: The way we manage our businesses is quite based on the synergy in between. As for the market development and customer service activities, we are centralizing most of that in Beijing today; as for export business, we're centralizing it in Detroit. There's also synergy in the product development and technology area, and we're looking to recruit some new senior engineers to strengthen the company's R&D capability.
Gasgoo.com: How about sourcing/procurement activity inside the companies?
Gary Riley: That's a future area we're looking to improve. There can be more synergy, but the first thing we look at is what's good for our customers, so improving our quality products and service and improving our technology level is the first important thing, then we will look at synergy and cost. It's difficult to achieve synergy or cost-saving if you don't secure the right orders.
As for our supply chain management, we did have done some consolidation in key product areas, like our fuel system products; some are international so we prepare them here. But what we are doing at the moment with our supplier base it to improve its quality, and then we can look at cost reduction.
Gasgoo.com: ASIMCO developed Electronic Unit Pump (EUP) that enables the fuel system to meet Euro III emission standard China adopted last year. It's affordable and it's well marketed. Do you have any sustainable solutions to meeting more stringent emission standards in the coming years?
Gary Riley: We're also making preparation on other technologies, like the EGR solution, common rail—we're launching our common rail products in the year to come as there's market demand. Having new products ready to meet the stringent emission requirement is always a key part in maintaining our customers. We're actively preparing products not only for this year, but three or four years to come. What we're doing now is to improve our R&D capability—to establish deeper and wider fundamental technology facility, to improve our designing capability and so on.
The market in China is expanding and changing fast, so we must anticipate these changes. And we must make our products available to our customers.
Gasgoo.com: How about your NVH technology?
Gary Riley: Historically our NVH technology is more export-related, but now we mostly serve the local customers. We have nearly 15 new projects from the local companies (some are joint venture companies some are purely domestic player), which we feel very excited. By focusing on export in the past year, our technology and engineering capability was valued by the local companies. We have the right technology at the right time; we can help them improve because we have focused the international business first.
Gasgoo.com: These days, lots of large projects being cancelled or put on ice; they passed cost pressure to their suppliers. And you…?
Gary Riley: We do see some programs delayed, not so many canceled; this is reasonably to fit the market. I heard that a program which is supposed to start next month is now delayed for six month. But that happens even in good economy—people will delay or pull forward. This is something you have planned for. I don't see any things in terms of orders/ projects make me very concerned now.
To align our production capability, what we do in the short run is to work for fewer hours, hold back any investment (we’re not spending money to add new equipment this year), asses the demand and schedule just as accordingly, rationally use the investment…
Nowadays, most of our customers' concern is not on discussion of price, but how do we improve the technology level of our products, how our local customers can compete better with the international companies.
Gasgoo.com: Your overseas market business is mainly based in North America and Europe, is it likely for you to expand in other emerging markets?
Gary Riley: Most of our export business is to serve our customer in North America and Europe. We also exported parts to Mexico or Eastern Europe, but it's mainly to support our American or European customers that have manufacturing facility there. In Japan we focus on technology; we have some Japanese customers—they may be a Chinese or East Asian company but the developing and marketing goes through our Japanese office. In the near term, we don't have a plan to open an office outside China.
The majority of our sales (over 70%) is derived from the domestic market, a lot of new product developing is focus on the domestic market. Today most of companies we serve are multi-national companies, and what we see is to serve them here and we may talk the possibility to export to serve them overseas. We won't look at export to new customers at the moment.
Gasgoo.com: I noticed that ASIMCO promotes a tighter relationship with customers by on-site visits and communication at all levels. Tell us how you carry out your Key Account Management.
Gary Riley: All the people talk about Key Account Management, but it's much easier to say than to do. Here I can give you a brief description. For a customer we're doing multiple business developments with in China and internationally, we have a Key Account Manager. The person needs to know more details than the customer does; he can monitor and report on market and competitor activities and provide relevant reports and information; he can communicate well even there’re ten different customers; they look at us to better their information and product flow. This is the Key Account Manager should work; he should add value to the customers based on making their life easier.
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