German car-parts maker Kiekert AG has emerged as one of the crown jewels in overseas acquisitions by Chinese companies after reporting solid growth and continuous profitability for two years in a row, a top company official said on Friday.

Kiekert, owned by Chinese car parts maker Lingyun Industrial Group, which makes latch systems for passenger cars, is already a global market leader in its segment, said Li Xizeng, chairman of the Lingyun group.

During the first five months of the year, Kiekert already clocked revenue of 2.22 billion yuan ($352 million), a 43.36 percent growth over the same period last year, Li said adding that net profit in the same period rose by 35.4 percent.

Market share has also risen in the two years since Kiekert was taken over by the Chinese company, he said. "Kiekert has a 19 percent share in the global automotive latches market."

According to the chairman, the Kiekert experiment is not just a successful overseas acquisition, but more of a blueprint that Chinese companies can use in overseas markets for sustained growth.

"We have been able to deflect criticism and show how going global can help bring dividends, "Li said.

"Being an auto parts supplier, Lingyun had always harbored dreams of going global. With Kiekert we have been able to make our dream a reality and an integral growth strategy for the group."

According to Li, nearly 70 percent of the overseas deals made by Chinese companies fail due to various reasons." Most of the deals fail due to differences in management styles and practices.

The mismatch also leads to companies being unable to keep pace with market development and being unable to alter strategies. Cultural differences also have an impact on the success and failure of such deals."

Citing the Kiekert example, Li said that when the Chinese company completed its takeover it faced the same constraints. "We had to grapple with issues like employee exodus, brain drain and client losses, issues that could have made the difference between success or failure," Li said.

To deal with the issues, the group came out with several measures, Li said, including steps to retain the existing and experienced management team. "This helped stabilize the company after the acquisition."

To gain trust and avoid forcible intervention, Lingyun decided to adopt a decentralized approach by delegating more powers to the existing management, rather than appointing someone from the Chinese company to run the show.

"We knew that the existing talent was more than capable and qualified in their respective fields. Our strategy was to let them do the job, "said Li.

To further dissipate tension among employees, Lingyun decided to press ahead with the 'employees first' strategy, rather than the conventional 'shareholders first' method. Needless to say the approach was well-received by the Kiekert employees, he said.

"Lingyun has helped strengthen our international business, and shown us a new approach to success," said Uwe Hohndorf, chairman of Kiekert Labor Union.

"What this has really done is to instill in the employees our core value of quality in processes and products, Hohndorf said.

"They are constantly aware of their special responsibility and put this into action in everyday work. " Lingyun, as the holding company, also held regular talks with Kiekert's suppliers and clients, to ensure continued cooperation.

Li, however, said that real benefit for Lingyun came when the German unit played an integral role in overall revenue and profits. By the end of May, 45.3 percent of Lingyun's revenue and 36.6 percent of profit for this year came from Kiekert, he said.

In the first five month of 2014, Lingyun generated sales of 4.9 billion yuan, with sales up nearly 20 percent and profit up nearly 60 percent over the same period last year.

"We are confident of sustained growth and in being a key player in the global auto parts industry," said Li.

Lingyun, part of China North Industries, a State-owned business, was a defense equipment maker from 1971 onwards. During the 1980s, the company shifted to civilian automotive parts and plastic pipelines as defense orders dwindled.

qiubo@chinadaily.com.cn

(China Daily USA 06/16/2014 page14)