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Sany does heavy lifting in pursuit of growth in US

By Tan Yingzi in Peachtree City, Georgia | China Daily | Updated: 2012-10-12 12:19

Sany does heavy lifting in pursuit of growth in US

Workers from Sany America demonstrate the company's earth excavator alongside models made by rival manufacturers to potential American clients on the Sany corporate campus in Peachtree City, Georgia, about an hour's drive from Atlanta. Cai Chunying / China Daily

On Sany America's sprawling campus on the outskirts of Atlanta, with the modern factory serving as a backdrop, a line of earth excavators bearing different manufacturers' nameplates operate in a kind of choreographed competition - Caterpillar, Doosan and Volvo, against Sany's own machine.

In a small white tent near the edge of the field, a group of potential American dealers and customers are being pitched on the merits of the Chinese-made heavy equipment.

In the eyes of Tim Frank, newly appointed chairman of Sany America, the excavator demonstration was an effective way to introduce the company and underscore for skeptical potential clients its commitment to the US market.

Tang Jianguo, who has worked at Sany Heavy Industry Co for 17 years and is now president of its US subsidiary, said the demonstration exemplified a grand ambition: to surpass industry leader Caterpillar Inc.

Sany's $663 million acquisition in March of Putzmeister Holding GmbH, a German manufacturer of concrete pumps, was a strong sign of its aspirations of aggressive global growth - a strategy pushed by the Shanghai-listed company's chairman, Liang Wengen. According to Forbes magazine's 2011 billionaires list, Liang is the richest person in China.

Set up in 2006, Sany America is a wholly owned subsidiary of Sany Heavy Industry, China's biggest manufacturer of heavy machinery, mainly used in engineering and construction, and No 6 in the world.

Under Tang's leadership, the US arm has worked to established itself in the domestic market by focusing on the key areas of research and development, production, sales and service.

In the past five years, it completed the first phase of its infrastructure investment program, formed a stateside work force and got business operations running at full steam. Its sales network covers 65 percent of North America through 12 primary dealers.

"In next five years, we will become number one in market share of crawler cranes and excavators in North America," Tang told China Daily in his new office.

The subsidiary, which now has about 100 employees on its Peachtree City campus, has said it hopes to become a magnet for skilled workers across Georgia, with the goal of hiring up to 900 people within five years.

The $60 million campus houses a stand-alone R&D team for Sony America as well as 360,000 square feet (33,445 square meters) of manufacturing space.

Under its agreement with Georgia's Fayette County, Sany will invest over $100 million to develop a 228-acre, state-of-the-art plant to design and build Sany products for the US and Canada.

Toward its market-leadership goal, the Chinese parent company created a position for Frank, a veteran executive, to oversee the subsidiary's excavators business, while Tang is in charge of crawler cranes, rough-terrain cranes and port equipment.

Frank, 44, is a native of Peoria, Illinois, which incidentally is home to Caterpillar, the company Sany hopes to supplant. He received a bachelor's degree in business from the University of Illinois at Urbana-Champaign and a master's in history from Illinois State University.

After years of industry experience with US and European companies, Frank took a job as global strategy consultant, in Shanghai, for the board of Sany Group, the corporate entity that oversees Sany Heavy Industry and its various overseas units.

"My job as the chairman is to develop the strategy to take the great base and rapidly grow Sany's presence in North America," he said.

At Sany America, this means more than doubling sales each year and moving past five established competitors to reach the five-year target.

"It's a very, very aggressive strategy that's not easily done. Historically, it's never been done by anyone in this space," Frank said.

As chairman, he faces two major challenges: technology and distribution.

Specifications on equipment vary by country or region, particularly those with engine emissions. What's required or accepted in China may be quite different from standards elsewhere, Frank explained. Sany America must work with its network of suppliers to modify engines and other parts in a nimble, efficient manner.

As a relative newcomer to the market, finding the right distribution partners and building reliable channels are just as critical.

Sany America already has its selling points, Tang said.

"Sany makes brand-new equipment to meet market demands. We work together with our dealers setting the price, and our quality guarantee doubles the average standards of our competitors," he said.

The subsidiary tries to outdo rivals in customer service, offering warranties valid for two years instead of one year, or 4,000 hours rather than 2,000.

Along with conventional business-development strategies, such as securing dealers, Sany America also has "creative" plans in the works, according to Frank, though he and Tang declined to give details.

"We will take some actions in the near future to quickly expand the market," Tang said. "We are very interested acquiring some key parts suppliers and competitors. As the market is still slow in recovering, there are a lot of such opportunities out there.

"Some competitors are willing to consider the acquisition it the terms are OK," he added.

But the executive admitted there could be hurdles in buying up US companies, including what he calls misperceptions about Chinese companies.

"Though Sany is No 6 in the world, many American clients and peer companies don't know that we are a privately owned, publicly listed company. Here in America, they still have some taboo" about working with a Chinese company, Tang said.

On Sept 28, US President Barack Obama blocked the sale of four wind farms near a US Navy testing compound in Oregon to Chinese-owned Ralls Corp, citing national-security concerns. Delaware-based Ralls is owned by two Sany Group executives.

Joe Hanneman, who joined Sany America this summer to lead its marketing team, said the company also needs to overcome negative opinions about goods designed or manufactured by a Chinese company.

"Many North Americans will automatically think that it's not something of high quality," he said. "It's a stereotype and inaccurate. So we have to get people past that idea."

In September, Forbes put Sany 85th on its 2012 list of the world's 100 most innovative companies, the second year in a row Sany made the magazine's ranking.

Sany invests 5 percent to 7 percent of annual sales revenue on R&D, higher than the industry average. Over 7,000 Sany employees are involved in R&D, and half of them have master's degrees or doctorates, according to the company.

Tang first heard Sany Heavy Industry chairman Liang's slogan, "Learn from CAT, surpass CAT" when he attended the semiannual meeting of the board of directors in August at company headquarters in Changsha, in eastern China's Hunan province.

In the first half of 2012, Sany's sales revenue rose 1.6 percent, with $1.3 billion in profit, while the average across China's construction-equipment market was a 28 percent revenue decline due to reduced demand and slower economic growth.

To become a truly global industry power like Caterpillar, or Cat as it's known, Sany is striving for a balance in developed and developing countries to diversify its revenue streams, Frank said.

"Sany has benefited from its fabulous growth in domestic China, but they know that growth won't last forever," he said. "When the day comes that China cools down, we don't want to wake up and find ourselves having 98 percent of revenue in domestic China.

"Personally, I would love to see Sany have over 40 percent of its revenue outside China."

In 2011, less than 10 percent of the company's sales were from abroad.

Its Georgia-based US arm is a big part of role Sany's global blueprint.

"Traditionally in our business, if you work successfully in Europe, the United States and Japan, you could become a global competitor. The rise of China has changed all that; you have companies like Sany that can dominate China and, in so doing, dominate the world.

"Sany is No 6 in the world. However, to ultimately become a top 3 player, we have to have success in North America and Europe," he said.

In Europe, Putzmeister was the role model for Sany since Liang co-founded a small factory in 1989. After 23 years, the acquisition of the German company made Sany the world's leading pump manufacturer.

In the United States, "We have been looking up to CAT for a long time and we are very much looking forward to such an opportunity," Tang said with a smile.

tanyingzi@chinadailyusa.com

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