Pin Ni, Who Turned $20,000 Into A $4 Billion Company, Discusses Chinese Investments In The U.S.

via Forbes by Ellen Sheng

At a time when Chinese companies are investing more than ever in the U.S., Wanxiang America stands out. Few Chinese companies have been in the U.S. as long, over 20 years. Based in Elgin, Illinois, outside of Chicago, Wanxiang America was started in 1994 as the U.S. outpost of Chinese auto parts giant Wanxiang Group.

Pin Ni, its president, started the company with a $20,000 investment at the behest of his father-in-law Lu Guanqiu, Wanxiang Group’s founder and one of China’s wealthiest men. At the time, Ni was studying for a PhD in economics at the University of Kentucky. Since then, Ni has turned that personal investment into a $4 billion company with interests in auto parts, real estate and renewable energy. The company typically invests in distressed companies, then works to stabilize and grow the company, creating jobs along the way, Ni describes.

Wanxiang America has stayed fairly low key until recently, when it acquired A123 Systems, a bankrupt electric car battery maker with U.S. federal backing. Wanxiang eventually won approval to proceed from the Committee on Foreign Investment in the U.S., which was called in to review the sale after some lawmakers expressed concerns about taxpayer-funded technology being acquired by a foreign purchaser.

Despite the rocky path to acquisition, Wanxiang’s acquisition of A123 is seen of one of the biggest success stories of Chinese investment in the U.S., with Wanxiang saving more than 500 U.S. jobs, turning the company around to profitability and increasing manufacturing capacity.

With Chinese investments in the U.S. hitting a record high of $18.4 billion in the first half of this year, Wanxiang is finding itself bidding against Chinese companies more often. In a phone interview, Ni recently talked about misperceptions about Chinese companies and the effects of globalization and technology on jobs.

Wanxiang was an early entrant to the U.S. market and had the advantage of a strong connection to China. Now there are many other Chinese companies investing in the U.S. How does that change the competitive landscape for you?

Just like everything else, there’s a positive side and a negative side. On the positive side, the [entry of] more Chinese companies here results in more recognition from the local community. Sellers will take a Chinese buyer very seriously because they know they will close the deal.

On the negative side, Chinese companies sometimes pay more than they should, sometimes 30% to 40% more. When we compete against industry players in the U.S. [on an acquisition] we often lose but sometimes we win. With companies from China who are looking for synergistic value, we have little chance to win – we’re just not a good price bidder. The other negative is that Chinese companies conduct business differently from U.S. companies and that can cause some misunderstanding and misperception. That’s not good and can do a lot of damage to people’s perception of Chinese companies.

But our view is that competition is the least of our worries. Don’t worry about eliminating the competition. Competition will only help you become a stronger company.

Some economists decry investment by Chinese companies, saying it takes jobs away from the U.S., especially in manufacturing. Wanxiang has been held up as an example of a Chinese company that has invested successfully in the U.S. and has not sent jobs to China. Is your business model different from other Chinese companies investing here?

We have the freedom to do anything but one thing we don’t have freedom to do is cut the labor force. American companies can make business decisions to cut the labor force but if a Chinese company does it, it’s a political issue.

But I’m not a buyer for this kind of high multiple value asset deal. We’ve bought many companies that have been struggling on the edge of bankruptcy or in liquidation. We stabilize the company, inject capital and create more jobs. But it’s not our business plan to hire more people for the sake of hiring more people.

We love to hire people. But it doesn’t matter if it’s in the U.S. or China or Mexico or Europe. All employees as long as they are getting paychecks from Wanxiang are Wanxiang employees. If a company doesn’t take care of its people you won’t have a company anyway. [When Wanxiang won approval to buy A123 in early 2013] several media reports referred to Wanxiang as the “white knight” that saved the company and jobs.

But on the issue of Chinese companies investing here and also on the issue of jobs moving to China or other parts of the world – that is not anything that anyone can change. It’s part of globalization. Technology is our biggest enemy in terms of cutting jobs, but it also creates new jobs.

Wanxiang America helps American companies looking to work with China through the China Source Program and America-China Bridge program. What are some of the biggest differences between the Chinese business landscape and the U.S.?

For the last 30 years, China has been changing its rules and laws as part of its reform to become a free market economy. In that environment, companies have to react quickly, be very brave and be willing to take a risk and push the envelope to try something new.

I’ve joked before that in China, a red light doesn’t mean much if you want to cross the street and have a good cause. You just need to give it a try before everyone else does because the rule might change and what is not allowed today might be perfectly fine tomorrow. That’s been the environment.

In the U.S., you have to understand and respect the rules that have already been well established and play by the rules. When American companies go to China they need to be willing to move fast and take risks. That could mean not waiting for headquarters to define the business plan or not waiting another two months to debate the strategy. By the time you have a detailed business plan figured out, the environment may have already changed. In China, you have to move very fast, be able to take a risk and have the guts to say, if it’s a mistake, it’s a mistake.

The nice part about the U.S. is that the rules are very well established so you don’t have to worry about new rules, just understand them. Nobody says you cannot invest in the U.S. but if you are going to take advantage and it could harm U.S. interests, then they don’t want you to do that. You can show them that’s not your intention and that it will not happen. As long as you can show that, you can be approved. It’s still better to have a rule so you know what to do.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.