The Story of ASIMCO
By: Jack Perkowski
In January 1993, I was 44 years old; I was in Beijing; and I was about to begin the greatest adventure in my life. I was about to begin the long, hard— and perhaps impossible— job of building a leading auto supplier in China, a country that was completely new to me and where I had no experience. In fact, few Westerners had any familiarity with China in those early days.
Over the course of the previous two and one-half years, I had successfully transplanted myself from a twenty year career on Wall Street and a comfortable life in New York City to live, work and build a business in China. Given the size of China’s population and the progress that the country had made since opening up to the outside world in 1978, it seemed to me that China was about to become a very important story in the 21st century, and I decided that I wanted to be part of it.
Even though I had no experience in autos, China’s auto industry seemed to hold particular promise. Like the United States, China is a big country. Almost to the square kilometer, China is the same size as the United States. If China continued growing, I reasoned, an increasing number of people and goods would need to be moved around the country, and China would need highways, trucks, buses and passenger cars—- and a lot of them.
I wasn’t alone thinking this way. Companies like Volkswagen were coming to the same conclusion. By 1992, Volkswagen had two joint ventures in the country and was on record as saying that China was its single biggest growth opportunity. However, Volkswagen knew that it could not make good quality cars without a good quality supply base. Volkswagen was frustrated, though, because when it tried to convince its European and US suppliers to follow it to China, most said it was too early.
The Chinese government was also frustrated because it wanted to build a large auto industry. In any developed country, the auto industry accounts for about 12% of GDP. It provides jobs, transportation options and brings technology to an economy. Like Volkswagen, however, China knew that it needed a good supply base, and Western suppliers simply weren’t coming to the country. In order to encourage foreign investment in its auto supply industry, China passed a policy in 1993 that said that foreign investors and foreign companies that invested in China’s auto components companies could have majority ownership.
Today, of course, there are many industries where foreigners can majority or 100% of their operations in the country, but in 1993, automotive components was the only industry where this could be done. This was important to me, because even then, it was clear that every year that went by, China was becoming more integrated into the global economy. Therefore, it wouldn’t be enough to build a good company in China; we would need to build a company that was globally competitive. That meant that whatever I found on the ground in China in terms of people and factories, they would need to change—and I had to have the ability to change them. That’s what majority ownership would give me.
So, in January 1993, I set out to build a major auto components supplier in China. I believed in the growth of the industry; there was a vacuum because the traditional auto suppliers weren’t coming to the country; and the government said that I could have majority. My plan was to buy majority ownership in a dozen or so auto suppliers across China; unite them under one umbrella and install common management and quality systems to build a global company based in China.
In order to help me, I recruited two people to work for me. One was a British accountant who spoke Chinese; the other a China national. Together, the three of us visited over 100 factories in 40 cities all around China during the first nine months of 1993.
During those nine months, I like to say that I ate every part of every animal—with the emphasis on every. During those nine months, I also drank more Baiju than any human being should drink in a lifetime. Those of you who have been in China are probably familiar with baiju—China’s national drink that looks like water, but smells and tastes like Kerosene—and is very strong! Today, you can buy wine, beer or any type of liquor you want at most restaurants in China. But in 1993, baijiu is what the Chinese drank—and they drank a lot of it.
Unlike today where there is a lot of capital in China, no one had capital in 1993. The way the Chinese looked at it was that there was this guy with twenty years of experience on Wall Street—me–travelling around the country, saying that he might bring capital to your city or your factory. Everyone wanted to show us a good time, so that we would come back. For nine months, we had a two factory a day schedule—and our schedule was the same every day. We’d get up in the morning; get in a van; travel for two hours; get the factory presentation and the factory tour, be invited for lunch—a lot of food, a lot of bijou. Get back in the van; travel another two hours; get the factory presentation and the factory tour; get invited to dinner—a lot of food, a lot of baijiu.
In effect, we had the equivalent of two New Year’s Eve celebrations every day for nine months. Sounds like fun, but let me tell you, it gets old after a week. After nine months, I figured that I’d better go back to the States and get some capital before my liver gave out. I went back to my colleagues in the fall of 1993, and in six weeks over the Christmas holidays, raised $150 million to fund my company.
With money in the bank, I went back to China and founded ASIMCO Technologies in February, 1994, and then over the next fifteen years, built ASIMCO from scratch as its Chairman and CEO, before we sold it to Bain Capital a few years ago. ASIMCO today is about a $600 million sales company with a dozen factories in eight provinces in China and 12,000 employees. If you travel to China and see a truck or a bus, it’s running on a diesel engine. Chances are that 20 to 25% of the components in that engine could come from an ASIMCO factory. ASIMCO makes blocks and heads, piston rings, camshafts, fuel systems, starters and alternators, compressors—all the key components that go into that engine. Even today, there is no local or foreign invested company that has such a large share of such an important market.
At ASIMCO, we pioneered the development of local management, and were three times named one of ten best employers in China in surveys done by the Wall Street Journal and other prominent organizations. In 2008, China Auto News named me one of the 30 outstanding entrepreneurs in China’s auto industry—not just for one year, but for the entire 30 years of economic reform. I was the only foreigner on the list—the rest were Chinese entrepreneurs who had built very large auto businesses.
Meanwhile, my predictions about the Chinese auto industry were coming to fruition. China has now become the world’s largest auto industry, producing and selling about 24 million vehicles every year. China now accounts for approximately 25% of all of the vehicles produced annually in the world, and this percentage is bound to go up in the years ahead. Despite its growth, China’s auto industry still represents a major growth opportunity.