With the Olympics still fresh in everybody’s mind, we dropped in on a Chinese firm with global ambitions.
A worker in blue uniform in a traditional Chinese hat is watering a flower bed at the edge of an ornate garden, complete with dwarf hedges, benches and a dovecote.
The wet grass and freshly dug beds look new, though this is hardly surprising as most of this site is either new or soon to be upgraded.
What might come as a surprise, though is that this is no theme park or country estate. Rather it is the centre of a Chinese firm LiuGong’s wheel loader plant and head office.
Looking over the garden from a window of one of the surrounding buildings, Qin Weiguo, LiuGong’s GM, overseas business, is pleased about the progress the firm has made in the last few years.
However, he is realistic about the challenges presented by marketing a Chinese brand that few foreigners have heard of.
“We need to make the range more suitable for each market” he said, adding; “Each of the markets have different product requirements, so there will be more development in the product to make the product more suitable for the market.”
“We need to expand the range. Right now we have the 20-ton digger, but this is not enough. We need more compact products – like the four ton mini-excavator for Europe and North America, while we also need a heavy excavator for markets such as Africa where there is more demand for the huge machines. So we need more to make the range suitable for all the market.”
Despite this, LiuGong’s range is hardly small. From being a producer of wheel loaders for the domestic market a few years ago, the firm now has items in its catalogue for every equipment category, including wheel loaders, bulldozers and compaction equipment.
Steel
Steel availability isn’t a problem as there is a mill in the city of Liuzhou where the company is based. The quality of the metal seems good too; In fact General Motors use it in its recently-established car plant elsewhere in the town.
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However, the price of steel fluctuates just the same as anywhere else, though a firm can’t just increase the price of the finished product.
“The price has gone up 50 per cent over the past two years and this is a big pressure for the company.” Mr. Qin explained.
“One solution is to make more of the steel we use. In design, we can use less steel, like the engine cover is now made of fibreglass. On the excavator, we used to use steel for the counterweight, but now we use concrete. We have to find many, many solutions to reduce the cost. The quality can go up, but the price must not. We have to ride this” he said.
Popular belief has it that manufacturing in China is cheap. Certainly labour is much less than developed countries, but imported components are subject to the same shortages, tariffs and seasonal price fluctuations as anywhere else.
One solution is to improve the method of production, and LiuGong has bought in the SAP system of factory management where components are arrayed as soon as possible.
This is by no means the first modern management system that the company has tried, but it is certainly the most efficient, resulting in increased capacity for little extra input.
Mr. Qin said “Now we can produce more than before. For the assembly line we didn’t really increase the labour. We just improved the system.”
Engines
Most of the firm’s products for export feature Cummins engines mated to Kawasaki hydraulic systems. As often reported in these pages, diesel engines are in tight supply, though this isn’t a problem if production schedules are stuck to.
It can be more difficult though, when the firm decide to increase output. “The problem becomes when the demand increases, and Cummins don’t have the capacity to supply it,” Mr Qin said.
Another way to get around import restrictions is to build components under license. Usefully, and perhaps surprisingly, German transmission manufacturer ZF set up a facility to make parts on site in a reciprocal agreement back in the 1990s.
The plant is modern and clean as one might expect, in fact you could be forgiven for thinking that you were in a European facility – Even the pallet trucks were made by Linde.
Some of the latest axles and differentials are made there including the 4WG-200 Powershift transmission used in LiuGong’s best-selling 856-model wheel loader.
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Mr. Chen Bo, Overseas Service ZF said “Our company is a joint venture between ZF of Germany and LiuGong. ZF share 51 per cent. It was founded back in 1998, when we made the first transmissions and we have made over 20,000 units. Many OEMs use this transmission and axle.”
From the office it is a short walk past the aforementioned garden to the main wheel loader assembly line. Inside, the loader plant, workers scurry around the production line, while an array of gantry cranes swing back and forth, picking up and dropping components as needed.
Like most modern lines, manual heavy lifting has been virtually eliminated thanks to the cranes. This means that of the 450-strong workforce more than 100 are women, including, we noticed, the crane operators.
We found some more statistics about the size of this operation, too; The wheel loader assembly lines produce a new vehicle every 8-12 minutes, depending on which model is being built.
This gives the factory capacity of a staggering 30,000 loaders per year, which by even the most conservative estimates put LiuGong in the top five of volume producers in this category.
Welding
To be fair, not all aspects of the factory are ultra-modern. Just as ancient bicycles ride alongside brand new cars through the town, automatic welding machines share floorspace with manual welders.
“These machines are expensive compared to local labour.” Mr. Qin explained. “So we uses semi-automatic. This reduces the investment and uses the cheaper labour.”
He added “Welding needs a lot of training. We have in the city a lot of technology training schools, so the young people have these skills. In the factory we also do a lot of training. But for the welding, the salary is higher than normal.”
Producing high volumes of loaders won’t in itself sort out the global market requirements. As most readers of this magazine are well aware, fast availability of replacement parts is just as important and so the firm also run a huge logistics centre at the main factory site.
Neatly pallets of component boxes line the labyrinth of corridors around the centre, which in turn feeds the network of parts counters in China and around the world.
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Stock is controlled by scanning in barcodes, which also means the computer software can take action to replenish supplies before they run out. Mr. Laio, GM, parts division, said “Getting the supply right is half the battle. This is part of our strategy to become a world-class solution.”
Excavators
It’s a short drive across town to see the excavator plant in action. A hundred or more machines are waiting outside the assembly lines to be picked up for shipping, except for one, which has been decorated in special fiftieth anniversary colours for all the workers to enjoy on their way in.
At one side of the plant, an expanse of ground is ready to be developed for an expansion in capacity, in order to satiate the firm’s ambitions to expand the range of weights offered. Out of interest, the land came free of charge from the Chinese government, who also, at the very top level, own the company.
It is interesting to note that at the very top of the firm the chairman, a Mr. Xiaohua Wang, is in fact a government employee who wears the same smart blue uniform as everybody else in the company. “Our employees are the most important asset to the company” he said, illustrating a range of training and development options available to them.
The firm is not just active in Liuzhou though. Through a string of deals and takeovers other factories now produce LiuGong motor-graders, skid-steers and recently, through the acquisition of rival firm Bengbu Zhencong, mobile cranes will be made as well.
However, wherever the factories of the bought-out companies are, one thin will remain the same; “We will always leave the brand LiuGong. There will be no change. Two years ago we went to a brand management company in America, where they helped us to design our current logo” said Mr. Qin.
The name means, quite literally Liuzhou Manufacturing. With a company so unapologetic about it’s global ambitions, we suggest that it is a name you’ll see a lot more of in the future.
City of Liuzhou
Situated in the province of Guangxi, the city of Liuzhou builds far more than just construction machines. Every side street is full of little workshops alive with the buzz of arc-welders and the wail of angle grinders as tricycles, farm machinery and pipes are all manner of other metal objects are rebuilt, repaired, or otherwise reused.
It isn’t just cottage industries either. General Motors has a large engine plant and facility there, while ChenLong truck heads, based on an old Mercedes design, are built there.
Also, a Chinese branded version of the famous Suzuki Carry micro van is based in the city, as well as various component manufacturers, a steel mill and a split rims factory. Despite all this heavy industry, the air quality is relatively good and with a population of just over one million the town is fairly small… by Chinese standards!