Haier: No plans to take bigger F&P stake

Haier says it will sell F&P in China but it may take a long time to attract Chinese consumer attention. Photo / Paul Estcourt

Haier, the Chinese home goods maker that bought a 20 per cent stake in Fisher & Paykel Appliances last year, says it does not plan to increase its stake in the New Zealand manufacturer.

Although not well known to New Zealanders, the firm clearly has the firepower to take over F&P Appliances.

In 2008, Haier reported revenue of $25.7 billion and according to a Euromonitor data commands a 5.1 per cent share of the global whiteware market.

Its 810ha industrial park and headquarters in the Chinese port city of Qingdao comes complete with its own streets, shops, accommodation buildings and "university" where staff training is carried out.

Another 2800ha Haier industrial park is located across the harbour from Qingdao in Huangdao.

But the company's evolution into one of the world's largest home appliance brands - with 29 manufacturing plants across 25 countries wasn't all smooth sailing.

Soon after its founding, in the mid-1980s, Haier sat on the brink of bankruptcy, plagued by quality issues in its single refrigerator line.

But an event was about to take place that has earned its way into Chinese business legend.

In 1985, Haier chief Zhang Ruimin received a letter from a customer disappointed with a faulty fridge.

His reaction to the letter saw him order his staff to destroy, with a sledgehammer, the 76 fridges sitting on the factory floor waiting for delivery.

Haier's Asia Pacific president, Philip Carmichael, says Zhang ordered the fridges destroyed to avoid them being "sold off the back of a truck", which could potentially lead to more disappointed customers.

Zhang reportedly said at the time: "If we don't destroy these refrigerators today, it is the enterprise that will be smashed tomorrow."

The sledgehammer is now kept in China's National Museum in Beijing.

With a little help from German manufacturer Liebherr in the late 1980s, Haier managed to improve the quality of its products and was exporting by the early 1990s.

The firm now has 60,000 employees and its products can be found in more than 100 countries.

In 1998, Haier established its global branding strategy with the motto "get in, stay in and take over".

The motto might be a little disconcerting to Kiwis anxious about Chinese expansion into New Zealand.

But Carmichael says the "take over" phrase, included in a company presentation shown to visiting New Zealand and Australian journalists, was a poor translation of Mandarin.

"Take over", he says, actually meant "be a leader".

Haier vice-president Zhou Yunjie says the firm doesn't have any plans to increase its stake in F&P Appliances.

Asked if Haier would participate in any future capital raising by F&P Appliances, Zhou says that would be a decision made by the boards of both companies, not him.

He adds the relationship between Haier and F&P Appliances was designed to have a win-win outcome.

F&P Appliances is selling Haier products in New Zealand through its dealership network. Haier will begin returning the favour to F&P Appliances in China, giving the East Tamaki-based manufacturer access to a market of almost unimaginable scale.

But Zhou says F&P Appliances lacks brand awareness in China, and it will be a long time before Chinese consumers begin accepting its products.

Haier will also face challenges in convincing New Zealanders to buy a Chinese whiteware brand.

While Haier is known for its fridges and washing machines, some of its other products can be a little quirky.

These include a TV set for children that forces them to answer a maths question before letting them watch their favourite programmes, rat-proof fridges and a mirror that recognises its user's face and sets the tap water temperature accordingly.

HAIER

* Manufacturing plants in 25 countries.
* Revenue of $25.7 billion in 2008.
* Bought a 20 per cent stake in F&P Appliances last year.
* Has a Chinese form of collective ownership.

Christopher Adams travelled to China as a guest of Haier.