One challenge for foreign machinery companies manufacturing their equipment in lower-cost China is the risk of cannibalizing business from their home factories.
But for Traverse City, Mich.-based twin-screw extruder maker Century Extrusion, the opposite seems to be happening. Century's Nanjing factory and China's economic growth are opening up some business for the U.S. firm's Traverse City operations.
Century's parent, CPM Holdings Inc., bought one of China's largest extruder makers, Nanjing Ruiya Polymer Processing Equipment Co. Ltd., in 2007, in a bid to bring the two firms together and build a more global operation.
Since then, the combined company has had to weather the severe global downturn and has shaken up operations in China with the departure of some former Ruiya shareholders and the arrival last year of a Century executive to run the Nanjing plant.
That executive, Charlie Spearing, recently sat down for an interview at the Nanjing Ruiya plant to offer a look at how the melding of the two operations is going.
Challenges aside, the company has had success with a new line of twin-screw extruders, its Apex series, jointly developed at its Nanjing and Traverse City factories, Spearing said in an interview in late May.
While the U.S. market is slower to recover, Spearing said CPM has been surprised by how its China presence is creating opportunities for Century's U.S. factory as top-end Chinese plastics compounding firms are looking seriously at foreign equipment particularly from the U.S. and Germany. Previously those firms considered foreign equipment too expensive.
So far, the successes that we've had in China have helped Century grow [in the U.S.] as opposed to cannibalizing the business, said Spearing, who became general manager of Nanjing Ruiya in October. Honestly, we never considered that China could [in the future] be the biggest market for our U.S. machines. It's pull from our China sales channels that we did not expect.
It's not that China is now the biggest market for Century's U.S. machines, Spearing stressed. Most of the business at either plant remains domestic or at least more regional.
But the growth in China is opening up possibilities and is part of a significant globalization, a big reason for the Ruiya acquisition, he said: I'll give you a fudgy number based on both companies a 50 percent increase in the export business in two years.
The sales to Chinese firms from the U.S. factory so far are what I would call case-by-case applications, Spearing said. But now, because we have so much exposure to the domestic market, we're being invited in on big, big expansion projects.
The expansion here is phenomenal. In the U.S. they buy one line. Here they buy 20 lines, he said.
While company executives declined to disclose specific sales figures, Spearing said the Nanjing plant did take a hit in the world economic recession. Sales from the factory only now are almost returning to pre-crisis levels, although recovery seems pretty strong, Spearing said.
Sales of new extruders from Traverse City, by contrast, remain below pre-crisis levels, as the U.S. market continues to be sluggish.
There is one bright spot for Century's Michigan plant: its aftermarket and parts business is better than it was before the recession, as firm tend to repair rather than replace machines, said Spearing, who was Century's manager of global sales and technology before his move to China.
CPM has been trying to take advantage of the strengths of the Chinese and U.S. operations to jointly develop new machines.
In 2008, it rolled out the first joint machine in its new Apex line, the CX model made in Nanjing but targeted at Western companies. It had the specifications of a Traverse City extruder and critical components from overseas, but with lower-cost assembly in Nanjing, he said.
This year, the firm rolled out another Apex twin-screw machine, the RXT model also made in Nanjing but targeted at higher-end Chinese compounders. Though it uses some components from U.S. and Europe, the RXT is cheaper than the CX because it also uses more Chinese content. Screw and barrel work is done in Nanjing.
The RXT is more expensive than a typical Chinese machine, but with what CPM calls significant upgrades in capability, such as a torque density that is a minimum of 10, aimed at the increasing quality demands of top-end Chinese firms, Spearing said.
This is what the domestic market is screaming for, and to our knowledge, it's the highest-torque, highest-power machine assembled in China, he said. After my experience here, [the RXT] probably has more potential than the CX because it's aimed at the domestic China market.
Spearing said CPM is trying to create a new offering in the market with the Apex machines, filling a niche of price and performance that it claims is new.
It's a market segment that didn't exist before; we created it in China and elsewhere in Asia, he said. Every one of those Apex machines is something we took from a competitor because they couldn't offer it. And in those machines, there is content from both Nanjing and Traverse City. It's great for both facilities.
Of course, much of the equipment Nanjing Ruiya sells is priced below the RXT. Those entry-level Chinese machines must compete in a market that is seriously, seriously price sensitive and getting more so, Spearing said.
But it is also a market segment CPM wants to focus on, even though it's crowded with much cheaper local competitors, he said.
There are many companies out there that have a lower cost structure than we do, because they don't have the support and the technology, and that stuff costs money, Spearing said. Our ability to continue to be strong [in that segment] means we need to be more efficient, be the best managers in this industry, and have very cost-effective but innovative designs.
CPM has also worked on making Ruiya more efficient. The Nanjing factory now has fewer than 200 employees, compared with 240 at the time of the acquisition. It makes roughly the same number of extruders as before, more than 20 a month, though some of those machines are now made with higher technology, Spearing said.
We're definitely doing more with less people, he said. That is a fact here.
The changes in Nanjing are part of how CPM tries to internationalize the companies it controls, he said. The parent firm is based in Waterloo, Iowa, and owns several other equipment makers.
We continue to push toward a view that is a group view, Spearing said. We want to make sure that we're delivering customers the best solution, whether it's put together in Nanjing or put together in Traverse City.
Century has worked hard to bring technology to Nanjing, and Spearing downplayed suggestions that the company would hold back technology from China. Bringing more sophisticated metallurgy and technology to China, and having control of it, is one reason CPM gave for buying Ruiya purchase, after several years of an informal partnership with the Chinese firm, Spearing said.
We are trying to bring any technology to this market that will help our customers succeed, he said.
But protecting intellectual property is a big concern, Spearing said, and the company only gives employees access to what they need to know.
Bringing the factories together has resulted in a more bi-cultural staff, as well. For example, the export manager in Nanjing, a Chinese national, worked for two years in U.S.
It has also meant some management changes from the previous Ruiya operations.
CPM did not renew the contracts of some former Ruiya shareholders who remained after the 2007 acquisition but have since left the firm, Spearing said. The company has been open with customers about those changes, he said.
Some key management positions also have changed since Spearing arrived.
To achieve our goals, we needed people who understood the CPM view and people that were clearly supporting the direction of the company, he said.
That CPM view includes seeking more international opportunities, with Ruiya's attention turning to India and Russia. Some Indian customers came by its booth at the Chinaplas trade fair in Shanghai in April and were interested in the RXT, he said.
India, to us, is pretty attractive market, Spearing said. It's price sensitive, but we do have a very cost-effective offering in Ruiya. They also have people who are growing, and they also have people who want higher technology, but maybe not a Western machine.
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