Count Haskell Knight as one U.S. plastics executive who views China as an opportunity as much as a threat. Knight, president and chief operating officer of Morton Custom Plastics Inc., said his firm has no plants in Asia and absolutely no interest in owning any assets there.
But MCP got in on the ground floor three years ago as a supplier of injection molded plastic parts to Chinese-owned Haier America Refrigerators Co. Ltd. in Camden, S.C. And he expects his firm's business with Haier to grow as the Chinese appliance maker aggressively moves to increase its penetration into North American markets.
``We will do close to $2 million [in sales] with them this year,'' Knight said in a May 16 telephone interview from his office in Harrisburg, N.C. ``We make all their clear parts - vegetable trays, butter trays, and the like.'' He said MCP - which generated $118 million in injection molded parts sales from its three injection plants in 2002 - currently is the sole supplier of such components to the Camden plant.
Knight explained that once his company learned more than three years ago who was building the large factory in Camden's Steeplechase Industrial Park, it put together a business proposal and requested a chance to pitch its plans to top Haier executives from China. The firms arranged to meet at the 2000 Consumer Electronics Show in Las Vegas, which all parties planned to attend anyway. That meeting spurred a lengthy train of events.
The Chinese officials toured Morton's injection molding plants in St. Matthews, S.C., and in Harrisburg, and then invited Knight and MCP to visit them in China.
``We did four or five trips to China,'' Knight said. ``I parked an engineer in China for several months.'' He said Haier built a state-of-the-art, 300,000-square-foot plant in Camden, and then it sat idle for at least 18 months, prompting some serious concerns at Morton headquarters.
``We had assets tied up with them for two years before any product was made,'' he said, and MCP started to wonder if its efforts ever would yield any dividends. ``They take a much longer view [than typical U.S. firms], when it comes to assessing the market. They're very thorough in the development process.'' But then, once they flip the switch, he added, they want to know how fast you can go.
Haier eventually began production in Camden in late 2000, and the following spring sent a team of six engineers to Morton's two Carolina plants for four weeks.
``They helped us to transfer tools and processes, and get quality plans in place,'' Knight said. ``When they set their mind on something, they become very, very focused.'' He also described Haier as ``a very good partner for us, very loyal.''
Apart from the obvious language differences, doing business with a Chinese firm - even one owned by a Communist government - did not differ substantially from a venture with any other type of non-U.S. partner, he said. There are always secondary approvals needed from the parent company, but that is no different than with the Japanese, according to Knight.
There are, however, some notable operating differences between those two Asian giants, from Knight's perspective.
``Unlike the Japanese,'' he said, ``the Chinese have not brought a large supplier contingent with them. So they're more open to dealing with a local supply base.'' Additionally, ``There is more American management [at Haier America] than I've seen at any Japanese plant [in this country].''
In Haier's specific case, he said, ``The Chinese came into our back yard quietly, unassumingly, planning to compete with the big boys.'' He suggested that the major U.S. appliance makers did not worry much about the firm at first, as they assumed Haier would be trolling in the bottom end of the market. But that is changing now.
``Haier is gaining momentum - not only at the low end, but now they're showing up in areas that weren't expected.''
Asked about his view of the threat that China's fast growth poses to U.S. manufacturing, Knight said: ``I think it's naive to think that we can block, stop or slow down that process.'' He added that he firmly believes the United States should work to ensure that China honors all its World Trade Organization commitments, but he said that, even if the playing field remains uneven, ``You just have to get on with it.''
``We all have to become world-class to develop applications that can stay in the U.S. Other products will go to Asia. And those [companies] who can blend both will be the ones that win.''