Sleeping with the enemy

This was posted a while back on another website, but it really did not get the play it deserved. I am amazed at the people who give this a "free pass"- Anyway this article was in China Daily and it talks about PPG helping the Chinese get into the float glass operations... not as a joint venture, but as consultants. I really don't need to say any more...

Sleeping with the enemy
DAI YAN2005-08-22 07:26


SHANGHAI: "We are businessmen," says James C. Diggs, senior vice president of PPG Industries, when asked how the company manages to co-operate with its Chinese rivals.
As a major flat glass producer in the United States, PPG was among three US companies to launch an anti-dumping lawsuit against several Chinese windshield manufacturers in 2001. PPG Canada Inc later initiated a similar case against Chinese imports.
The US Department of Commerce started imposing punitive tariffs of 3.71 per cent to 124.5 per cent on Chinese-made replacement windshields in 2002.
The trade battle became something of a legend in Chinese business circles after several domestic windshield producers pioneered an expensive fight against anti-dumping charges.
The results were not in PPG's favour and the Chinese companies emerged relatively unscathed. Xinyi Automotive Glass was slapped with low tariffs of 3.71 per cent, Shenzhen Benxun Automotive Glass Co Ltd was hit with 9.84 per cent in penalties and the largest company, Fuyao Group, received a punitive tariff rate of 11.8. Subsequent appeals brought Fuyao's tariffs down to zero.
"We were angry and upset. We were concerned about the implications," says Diggs. "Then we decided to have to find a way to address these concerns."
PPG now actively co-operates with many Chinese glass manufacturers, ranging from contractual arrangements to technology licencing.
"We give orders to Chinese companies and then we supply them in the United States or we license our technology to local companies to help them develop better glass," Diggs says.
Fuyao Group collaborated with its former foreign nemesis to launch three new float glass production lines in June, which is expected to boost the nation's lagging float glass production technology. Float glass is clear and flat, making it ideal as a major raw material for producing automobile glass.
Fuyao has spent 1.7 billion yuan (US$210 million) on the development of the enhanced production capability. The company has installed the world's most advanced float glass equipment and technology.
Cho Tak-wong, Fuyao's chairman and chief executive officer (CEO), says the joint effort with PPG, the world's industry leader, has created a firm technological base for Fuyao's future development.
"We are businessmen and we have the role to turn a good business," Diggs says.
"Now we've reached an appropriate middle ground, which is in both the interests of Chinese companies and PPG. That's the best way to do it."
The foreign manufacturer sold its flat glass manufacturing facilities in China to sharpen its competitive edge.
"In the flat glass business, we do not have the scale to compete effectively in China. We will focus on coating and fibre glass," Diggs says.
Besides flat glass, the Pennsylvania-based PPG is also a global leader in timber, automotive parts, aerospace technology, and industrial and packaging coatings. It is also a leading North American producer of architectural coatings. PPG also manufactures fabricated glass, continuous-strand fibreglass and chemicals. Sales hit US$9.5 billion in 2004.
China holds huge growth potential for PPG.
"We are excited about the market. It is big and we have to move aggressively to achieve the market position we have in other countries," Diggs says.
PPG started to invest in China in the late-1980s; its first project was supplying auto coatings for Beijing Jeep Company. Then it extended its scope, providing products such as industrial coatings, auto refinishing paint, packaging coatings, astronautics coatings and glass fibre products.
PPG has already established plants in Tianjin, Suzhou and Kushan, and business offices, labs and training departments in Beijing, Shanghai, Guangzhou, Shenzhen and Nanjing.
Its Asia-Pacific headquarters were moved from Malaysia to Shanghai last March, and it shifted its strategic emphasis from Chinese multinational auto manufacturers to both domestic and overseas auto makers.
"China plays a significant role in the overall growth of our company and we have targeted the country as a key region for investment and an important area for producing a range of products," he says.
Diggs says PPG is looking at expanding its coating and fibreglass business in China. The company and its joint venture partner, Nan Ya Plastics Group, started to build a second fibreglass manufacturing furnace at their Kunshan facility last year.
The additional furnace, with 38,000 metric tons of annual capacity, will serve the expanding electronics and thermoplastics industries. The new furnace is scheduled to begin operations in the first quarter of 2006.
The plant opened in September 2003 with one 30,000-metric-ton fibreglass furnace. The Kunshan plant can accommodate up to four furnaces, capable of collectively producing more than 120,000 metric tons.
This rapid plant expansion symbolizes PPG's ambition to be a leader in the Chinese market and meet the growing demand for fibreglass in Asia.
"We have already invested tens of millions of US dollars and we will invest even more in the second phase. It is our major commitment," Diggs says.
The company is also seeking to merge with domestic counterparts in order to expand more quickly. PPG faces several strong competitors in China, including BASF, Dupont, Kansai Paint and Nippon Paint.
"We are looking at the possibilities for mergers and acquisitions in China, with partners who can match our unique customer profile and share similar cultural values," Diggs says.
PPG recently expanded its Asia business by acquiring Crown Coating Industries of Singapore, a privately held manufacturer of specialty wood coatings. Incorporated in 1991, Crown Coating leads the Asian flooring industry in radiation-cured coatings. Crown operates facilities in Singapore and Shanghai.
"We have many choices, ranging from greenfield investments to mergers and acquisitions. We want to grow organically in China," Diggs says.