CHINA SUNSINE’S founder Xu Chengqiu is a treasure trove of wisdom in classical Chinese leadership.
Born to parents who were farmers, he was raised on a farm, and had his share of work on a cotton plantation prior to graduating with a degree in rubber chemical engineering at 22.
Mr Xu is 64 now. Like many others of his generation who lived through China’s social, economic and political upheavals, he was deployed by the state to work in a factory and underwent military reform.
The experience was not wasted on him. In an interview with NextInsight, he says it was invaluable to the formation of his character.
Running a business is a different kettle of fish nevertheless, he says. He has to consider business prospects, as well as the interest of stakeholders such as staff and customers.
In contrast to the western style of decision-making that glorifies financials, Mr Xu believes one should focus on product quality and service levels.
Top on his mind is his R&D department – skills upgrade and technology development. A true-blue scientist, Mr Xu has a passion for chemistry and says he would still be dabbling with chemicals today if the opportunity to run China Sunsine had not come a-knocking.
He had taught chemistry in a school for five years, and also professes a love for ancient Chinese philosophical classics.
Profits are a natural progression from doing things right, he declares. That is, practicing TAO (道).
For instance: ethics (道德), human resources and relations (人道), reason (道理), tools (道具) and fairness (道义), to name a few.
Mr Xu appears to have got it right in the TAO of management:
He transformed a small chemical factory in an obscure and impoverished Chinese county into the world’s second largest rubber accelerator maker.
Every single one of the world’s top ten tyre makers – Bridgestone, Michelin, Goodyear, Continental AG, Pirelli, Sumitomo, Yokohama Rubber, Hankook Rubber, Cooper Tire, and Kumho Tires – now use China Sunsine’s rubber accelerators.
He tapped on automotive demand by making chemicals that accelerate the curing process which transforms latex from rubber trees into tires.
Automotive is still a high growth sector today. China produced 8.9 million vehicles in 2007, a 22% increase y-o-y.
The company's FY07 sales reached Rmb 615.9 million, or a 30.5% rise y-o-y.
Net margins were 12.3%. Operating cash flow improved 57% to Rmb 57 million.
Bridgestone pulls in the crowd
Sunsine made Forbes 2008 list of top 200 companies in China with revenue under a billion yuan. This is a far cry from the pre-accelerator days when sales hardly exceeded a million yuan.
In the early years, Mr Xu was the factory’s sole chemist, and developed various chemical reagents and aromatic reagents for alcoholic drinks.
With fewer than 10 sales staff in 1994, Sunsine started producing tyre accelerators.
At that time, Mr Xu had his hand in every department, from personally knocking on doors to sell rubber accelerators, to market surveys and staff training.
The big break came when Bridgestone became a customer in 2002.
Bridgestone not only used increasingly greater amounts but also variants of chemical products from China Sunsine.
During two consecutive years of automotive trade shows in 2005 and 2006, the world's No.1 tyre maker endorsed China Sunsine’s products as being comparable to those produced by global chemical producers such as Lanxess.
Producing out of China allowed China Sunsine to sell at US$200 to US$300 lower a ton than its competitors. Seeing the obvious cost competitiveness, other large tyre makers also became customers.
The subsequent years of 2005-2007 saw China Sunsine’s inevitable earnings leap: Its cumulative average growth (CAGR) was 62.8%.
Leadership by virtue
Mr Xu’s leadership epitomizes wisdom culled from sages through several millennia of the world’s most populous nation.
The management chose a product brand name (Sunsine Chemical or 尚舜化工) that literally means chemical production in deference of Shun.
Shun is a historical figure revered by Confucians as a model ruler and moral exemplar.
Legend has it that Shun was so impervious to the allure of power that he once offered his throne of rule over Chinese civilization to his mentor, a sage from Shan County.
And Shandong’s Shan County today is home to China Sunsine’s factory and a million-odd people.
The company certainly lives up to its name as far as staff welfare is concerned.
Its wage rate for production workers is 30% higher than that of other factories in the county, where minimum wages are Rmb 760 a month.
Mr Xu himself is a people’s man. When the state wanted to sell the chemical factory to independent third parties in 1998, 358 workers (including Mr Xu and his management team) pooled together resources to stage a management buy-out of 70%.
That was when Mr Xu, then the factory’s manager, was voted to become executive chairman, a post he holds to this day.
The privatization did not take place without a fight. Bureaucrats stalked Mr Xu for as long as 3 years and 8 months, and tried to come up with reasons to veto the popular vote.
Mr Xu’s track record turned out flawless and today, with key management personnel, Mr Xu holds a controlling 59.6% stake in the company.
His son, Xu Jun, 38, is one of the company’s executive directors, and is working on a new factory which will produce yet another type of rubber additive – tyre anti-oxidant TMQ for its behemoth clients.
Another son, Xu Chi, is in charge of sales and marketing.
Mr Xu shies away from revealing succession plans.
But regardless of who runs the show in the future, his philosophical outlook and China Sunsine’s corporate culture assure one that nepotism is not the issue.
Recent China Sunsine story:
China Sunsine: picking up pace to be world no.1