Readers may recall that Perkowski is the Mr China of the book, kept anonymous but subtly disparaged by the Cambridge-educated, Mandarin speaking Clissold, whose book narrates the thrills and spills of doing business in China during the mid-1990s. Between the three of them (including a mainland Chinese), the founders of Asimco burn through several hundred million dollars. By the end, there is little discernible result, apart from the book, which is replete with vivid descriptions of sometimes violent skulduggery.
Yet who is having the last laugh? While the book has become a cult classic, and was seen changing hands at a recent conference in Beijing, Perkowski is now part owner and CEO of one of the biggest (unlisted) engine component companies in China. The company currently has 12,000 employers and turnover of close to half a billion dollars.
Looking down from the long row of windows gently curving from one end of his palatial Beijing office to another, itÆs clear that PerkowskiÆs subsequent ventures have performed far better than one might guess from the book.
ôTim wrote a great book, but itÆs a real pity that itÆs being used by so many people as an excuse not to engage with China. Given the importance of China to the world economy, itÆs not constructive. Times are different now,ö he says.
And itÆs hard to disagree with Perkowski. Clissold left the company seven years ago and times have indeed changed. ItÆs absurd seeing highly paid fund managers treating the book as if it were the last word on doing in business in China û instead of an excellent portrayal of a very particular set of circumstances.
The book also ends up doing Perkowski himself something a disservice. Not many people have had a first career as distinguished as PerkowskiÆs (which he ended as head of investment banking at Paine Webber), let alone his second, current career in China. After working on Wall Street for 20 years and already approaching middle-age, it took a certain kind of courage to become a high-stakes entrepreneur in a country of which, he freely admits, he knew nothing.
ôI always looked at China from the strategic point of view. It seemed to me that the basics were so strong that you could get away with making tactical mistakes.ö
The basics were simple. China had a young population and supercharged growth. What it didnÆt have was what Perkowski and his friends could provide: management, capital and technology.
But when Perkowski first came out to Hong Kong in 1991, although he knew he wanted to be in Asia, he did not know exactly where. It was only after meeting former Hong Kong Chief Executive Tung Chee-hwa, a former investment banking client during his time at Paine Webber, and his many friends, did Perkowski spot a theme.
ôThey would spend five minutes talking about Hong Kong, and the rest of the time they would talk about China. So I decided to check out China.ö
The eureka moment occurred when he heard the chairman of VW complaining at a Shanghai conference that their component suppliers had not followed them to China. As a result, the German company, which then had a near-monopoly on car production, was facing a serious shortage of quality parts.
ItÆs those early years of fundraising and then rapid fund depletion which are covered in ClissoldÆs book, and they need not be repeated here. Clearly, criss-crossing the vast country took its toll and did not always (to say the least) result in the perfect joint venture partners.
But picking the car industry in China showed prescience. China is now the second biggest car market in the world and sales are continuing to rocket û unlike the saturated markets of the US, Europe and even Japan.
Its economic importance to the country was such that it was named a pillar industry in 1998. And to PerkowskiÆs delight, it was named as a sector where foreign companies were able to take majority stakes û thus avoiding debilitating local partnerships. Clearly, this was one sector where the government was going to do its best to attract foreign capital and technology.
The only problem initially was that Perkowski and his partners knew literally nothing about the car components industry. After visiting yet another factory and not having a clue as to how to assess it, Perkowski got his personal assistant in the US to buy and post a book covering every nut and bolt of engine parts. The huge red tome has pride of place on PerkowskiÆs office bookshelf û one of the companyÆs æheirloomsÆ, as he puts it.
The key point for Perkowski is that itÆs a market no longer dominated to the same extent by foreign automakers. The consequence is that the company will eventually have to live or die by its ability to service local companies. These currently comprise almost 30% of the car market in China û and that proportion is rising.
ôDomestic automakers such as Geely and Cherry have made great strides servicing the domestic market, and increasingly, the foreign market. London black cabs are now being made in China,ö points out Perkowski.
Indeed, AsimcoÆs strategy is rather like a Trojan horse. By running operations as localised as he can humanly make them, the company has cut costs to near-Chinese levels, and far below the levels of foreign companies. He can thus serve foreign companies on equal terms with Chinese companies û although with substantially better technology and management.
ôMany foreigners still donÆt know how cheap China really is. Our local managers know this and are expected to act on it. So we are providing Western and the Chinese truck segment with a combination of Western managerial and technological know-how, allied to the low-cost Chinese approach.ö
The tactic seems to be working. Asimco has become one of the largest engine component suppliers (comprising items such as piston rods, crankshafts and so on) in the country, with a roster of clients covering all the top Chinese truck producers, as well as numerous foreign ones.
PerkowskiÆs Trojan horse strategy is important, because he believes the Chinese have brought manufacturing into a new and permanent era of low-cost growth. In other words, a company in the manufacturing sector had better learn to operate by Chinese rules û they are rapidly becoming globally applicable. Just having better technology is no longer a sufficient defence for Western companies.
ôEven with the rise of anti-pollution measures and new technologies, itÆs my belief that cars will still be made more cheaply in China than anywhere else in the world. ThatÆs to say, these constraints will not make Chinese good more expensive and thus give Western companies a break. In fact, you can argue that introducing environmental measures will have a tonic effect on Chinese growth û they canÆt keep growing in the same environmentally destructive and expensive way they have been growing historically.ö
The ægoing localÆ strategy is all the more important given that the foreign market û which at one point appeared to be the natural market place for a company like Asimco û is going belly up. Perkowski is clearly shocked by the sale of Chrysler for $7 billion. Not so long ago, ChryslerÆs market cap was over $30 billion, says Perkowski.
The writing is on the wall for the Western car and component markets. And itÆs written in Chinese. Luckily for him and his shareholders, thatÆs precisely the idiom Perkowski has mastered.
Founder, CEO and president of Asimco Technologies
BA from Yale University in 1970 (cum laude); MBA with the Highest Distinction from Harvard Business School in 1973; Baker Scholar
Working on his farm in New Jersey, weight-lifting, golf
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