The client of the interim manager and China expert was a medium-sized global plant engineering company with 1,200 employees. The company is a leader in the planning, design and construction of paint shops for all well-known car manufacturers and their suppliers of body parts. It has a subsidiary with 22 employees in China, which does not generate any attributable sales. The interim manager was hired as Chief Restructuring Officer (CRO) to expand the Chinese subsidiary into a profit center with a significant share of value added.
Initial situation: Chinese subsidiary is hardly active and poorly positioned
The customer orders in China, exclusively large projects for the construction of paint shops for car manufacturers of European OEM customers, were generated from the German headquarters (HQ). Engineering and project management as well as a large part of the installation work were also carried out entirely by employees from the headquarters.
On the project construction sites, the subsidiary's local employees merely supported the ongoing plant installations with administrative, coordinating services. The low level of local procurement of steel girders and electrical installations as well as the manpower required for installation only helped to make project execution cost-efficient to a limited extent.
The lack of local sales and processing structures and the low level of local value creation resulted in a massive loss of market share in China. Newly acquired orders did not generate a profit margin due to extensive imports of trades and manpower from Germany. Up-and-coming local suppliers and OEMs could not be won as customers.
Strategy: exploiting market potential with Chinese OEMs and suppliers
The interim manager developed the strategic direction of the company's involvement in China and formulated a "Strategy Map China" based on a company and market analysis, including a benchmark with international and local market competitors.
The focus of this strategy was the consistent development of local value creation for the major projects generated by the headquarters. At the same time, the subsidiary was to exploit future market potential with Chinese OEMs and up-and-coming suppliers. The subsidiary was to finance the targeted growth and expansion of the branch in China with local, profitable sales for aftersales and services in the installed base.
In his analysis, the interim manager had identified the following business areas, among others, as promising:
- Independent aftersales and service organization
- Setting up a sales key account management
- Building up local capacities for design and production
Service organization takes on first orders in existing paint shops
For the aftersales and service organization, the interim manager deployed local employees who had already gained experience in ending headquarters projects. Adjustment and expansion projects were carried out in these paint shops. The interim manager and a team from the headquarters qualified the local employees to manage and develop the service organization independently.
In addition, Chinese employees were involved in the project management of the HQ projects. This enabled the future project managers to acquire further knowledge and build up experience through guided on-the-job training.
With the new service business, the subsidiary is now generating the profit for further growth.
Introduction of sales-based key account management in China
In a further step, the interim manager professionalized the sales of the Chinese subsidiary. Thanks in part to his good contacts in China, he was able to poach Chinese sales professionals from market companions and work with them to set up sales key account management. Here too, the project benefited from the interim manager's intercultural expertise. He deployed the sales employees in accordance with the Chinese principle of "Guang Xi", the close network of relationship management, specifically with Chinese OEMs and local Tier 1 suppliers for body parts. The Chinese side of the international OEMs is now closely supported by the Chinese key account managers.
Local capacity building for design and production managed
With the temporary support of a German design manager, young Chinese talent could be integrated into the design requirements and execution of a project. This project became the nucleus of a design department. The new skills made a significant contribution to mastering tasks from the service business. They also enabled the subsidiary to constructively implement extensive - and profitable - subsections for projects from the headquarters on its own in the future.
In order to improve the conditions for handling larger orders, the interim manager initiated local production and pre-assembly for standardized trades. The 5,000 m² hall significantly increased the degree of localization - and at the same time prevented the technological lead from being passed on to the outside.
The conversion and expansion of the hall (implementation and localization of the dryer walls, body beams and rails as well as the cabin walls) was carried out with the support of a production manager seconded from the HQ. Chinese employees were qualified through trial work and subsequently trained for the respective task.
IT infrastructure, accounting and controlling harmonized with the HQ
The growing subsidiary was supported by local purchasing of technically non-critical steel trades as well as services and on-site manpower. In the medium term, Chinese purchasing, including the pre-assembly trades, was integrated into the parent company's global sourcing strategy. The trades from China were increasingly supplied to globally renowned projects.
Parallel to the organic growth, the interim manager established new management structures and brought intercultural team events, team spirit and identification with the company to the branch.
With the onset of growth, the interim manager harmonized the IT infrastructure, including accounting and controlling, with the HQ and established transparent monthly reporting.
Subsidiary develops into the foreign company with the highest turnover in just 3 years
Thanks to the increasing local turnover and market-specific expertise, deliveries from Germany were quickly reduced almost completely. The subsidiary gained local OEMs and their Chinese suppliers as customers. Within three years, the Chinese subsidiary became the highest-turnover and most profitable of all branches worldwide. After 3 years, the rapid growth was reflected in a workforce of more than 250 employees.
The subsidiary had been transformed to such an extent that the project management was only filled with experienced managers from Germany for major international projects. After 6 months on site, the interim manager facilitated the change within a long-term consultancy mandate.
