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A Chinese billionaire is staking his legacy — and thousands of American jobs — on this factory in Ohio

by Ylan Q. Mui, Washington Post   2016-11-02

Source: Other

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Lauren Hartley cleans and inspects glass at Fuyao Glass in Moraine, Ohio, on Sept. 29. (Andrew Spear for The Washington Post)

MORAINE, OHIO — Shortly after his private plane landed in Ohio on a recent morning, the Chinese billionaire set off down Interstate 75 to inspect the factory on which he has staked his legacy and the future of this gritty patch of the American Rust Belt.

The sprawling plant is a local landmark, just off the highway unofficially known as Auto Alley. General Motors built it in the 1920s, and for generations it created the kind of blue-collar jobs that defined America’s middle class. But by the time the last SUV rolled off the assembly line here, the city of Moraine had succumbed to the flood of inexpensive imports and cheap foreign labor that battered industrial towns in Ohio and across the country.

Now Cho Tak Wong is in charge of the factory. The billionaire chairman of Fuyao Group, the biggest maker of automotive glass in China, Cho rose from rural poverty by riding the same wave of globalization that devastated Moraine — a living example of the reversal of fortune that has turned China into the United States’ chief economic rival in public debates and political rhetoric. At a recent campaign stop in this perennial swing state, Republican presidential nominee Donald Trump called trade with the country “a one-way street.”

But the next chapter of globalization is already unfolding inside Fuyao’s factory, as the balance of power in the world economy tilts once more. Now it is China that experts fear is losing steam, forcing the country’s wealthy investors and corporations to seek out profits overseas. They are snapping up U.S. businesses at a record rate and employing tens of thousands of U.S. workers.

The shift is realigning Chinese and U.S. interests. In Moraine, local officials are counting on Fuyao to help revitalize this town of strip malls and dollar stores. Yet it probably will never be enough to replace what has been lost over the past generation. Nor is it likely to restore the momentum that is slipping away in China’s economy.

Still, Cho is convinced that such companies as his will ease the economic tensions between the two countries. Under gray skies and drizzling rain that day, he made his way to the factory that he has spent two years and a half-billion dollars renovating. The street it sits on has been renamed Fuyao Avenue. Outside the front entrance, the American and Ohio state flags fly alongside Fuyao’s blue-and-white banner.

“We’re committed to working to benefit both the Chinese and American trade relations,” he said in an interview, speaking through a translator. “All these problems will go away.”

Cho comes to Moraine almost every month to walk the floor of his factory, large enough to fit 41 football fields.

The plant is Fuyao’s single biggest investment anywhere. As many as 2,500 people are expected to work here when the plant is at full capacity, and Cho said he hopes it will become the anchor for an aggressive expansion into the United States that has already included a factory in Illinois to make raw glass and a facility in Michigan to put the finishing touches on its products. The total investment has reached about $1 billion.

“This U.S.A. is his baby,” said Mike Fullenkamp, operations manager of the plant in Moraine.

Cho was among China’s first wave of entrepreneurs, and his rag-to-riches story mirrors the country’s own. Growing up in impoverished Fujian province under the strict communist regime of the 1960s and 1970s, Cho often ate only two bowls of soup each day, leaving him so hungry that he would scream in agony.

“I’ve lived through the toughest times in China,” said Cho, now 70. “Even if I want to cry, I have no tears.”

When China began opening up its economy in the 1980s, Cho took over a flailing factory and reconfigured it to produce the glass windows and windshields increasingly in demand among car companies catering to China’s swelling middle class. Eventually, Fuyao began shipping glass to other countries, feeding the mammoth engine of exports that transformed China into the second-largest economy in the world, behind only the United States.

Meanwhile, U.S. industry was fading. Twenty-five years ago, more than 1 million people in Ohio held factory jobs. Now, that number is less than 700,000.

GM shut down its plant in Moraine just before Christmas 2008, amid the Great Recession. About 1,000 workers lost their jobs that day, and the vast, low-slung plant where they once worked spent years in darkness.

“When it was empty, it was really depressing-looking,” Moraine Mayor Elaine Allison said. “Here’s this monolith of building just empty, compared to how full of life it was back in the day.”

The wreckage of the recession amplified the anxiety many voters here have long felt over getting left behind by the global economy, and their frustration helped breed the discontented politics of this presidential campaign cycle. At a campaign stop in Ohio this month, Democratic nominee Hillary Clinton called out China for dumping steel into the U.S. market. Trump was even more pointed.

“They’re stealing our jobs, they’re stealing our companies, they’re taking our money,” he told his supporters in the state last week. “We have drugs, we have debt, we have empty factories.”

But the reality in Ohio is more complicated. State officials — including Gov. John Kasich (R), who ran against Trump in the presidential primary — courted Fuyao with more than $10 million in grants and incentives, one of their biggest packages on record. In return, Ohio is anticipating a $280 million windfall for its economy.

Since announcing its plans for a factory in 2014, Fuyao has tripled the number of workers it intends to hire. A glass recycling company is moving into a new building nearby. And Asian restaurant CJ Chan’s opened a second location near Fuyao after noticing an uptick in business from company employees — including Cho.

“I came to realize that the responsibility on our shoulders was really weighty,” Cho wrote in his self-published autobiography. “Any mistake on our part would bring disgrace not only on me, but also on Fuyao Group and the Chinese people as a whole.”

***

In China, Fuyao can run a factory at full capacity within a year after it opens. In Moraine, the company has been working on its plant since 2014.

“I should be satisfied,” Cho said. “But in comparison to my plants in China, there’s still a large gap.”

Two of the biggest challenges are hiring and pay. Fuyao has already brought on 2,000 workers and is seeking hundreds more — a challenge when the region’s unemployment rate is just 4.4 percent, below the national average, resulting in a smaller pool of available employees. Many workers who had been laid off over the years have since moved away or retired. In addition, Moraine has also steadily rebuilt after the recession, courting business beyond manufacturing — in transportation, health care and even technology — and that is increasing competition for workers.

For Fuyao, that means it is crucial to hold on to existing employees and get them to produce more. The factory is not unionized, and pay starts at about $12 an hour. During a recent meeting at the factory with his top Chinese and U.S. lieutenants, Cho grew frustrated at delays in making the company’s bonuses more enticing for employees.

“Is it because you don’t have confidence in me or don’t respect me?” Cho asked the executives. “We need to see action. Action is the most simple countermeasure to our problems.”

But even the company’s most generous offer is unlikely to match the pay U.S. manufacturing workers once enjoyed. Cynthia Harper said she made $30 an hour at the plant when it was owned by GM — more than double what she earns now as a production line worker at Fuyao.

Harper said she struggles to communicate with her Chinese-speaking supervisor and chafes at the breakneck pace set by managers, which often requires double shifts or overtime. Harper has also filed safety complaints with regulators and is working to unionize the plant. Fuyao said it has hired a former federal inspector to help ensure workers stay safe.

“They constantly remind us that that’s how they do things in China,” Harper said. “We’ll make statements that we’re in America, and we have codes that we have to go by.”

But how China does things is changing, too. Its economy is rapidly slowing down after years of double-digit growth. The world is already awash in Chinese goods, reducing the demand for its products. Last month, exports plunged by 10 percent compared with a year earlier. Rising wages and a burgeoning middle class mean companies can no longer rely on cheap labor to fill their factories.

To fuel the next wave of growth, Fuyao and other Chinese companies have to look beyond their country’s borders. Direct investment in foreign countries skyrocketed from $13.7 billion in 2005 to $187.8 billion a decade later — an increase of 1,294 percent, according to the Organization for Economic Cooperation and Development. Consulting firm Rhodium Group estimates that the United States alone received a record $18 billion during the first half of this year.

“It’s only now that China is becoming a rich economy,” said Eswar Prasad, a professor of trade policy at Cornell University. “I think we’re seeing the leading edge.”

Being in the United States does not make a company American, however. Fuyao said that while 90 percent of its employees are American, 10 percent are Chinese nationals. Cho has deepened relationships in Ohio by donating to the local university and entertaining clients at the Pine Club, a famous local steakhouse — even though he doesn’t eat beef.

Yet the cultural and language barriers are high. Cho rarely speaks more than necessary, giving his translators plenty of time to keep up but leaving his statements feeling like formal pronouncements rather than casual conversation. After discussing new plans for worker bonuses, Cho wrapped up the meeting with his executives by scheduling another one the next morning and then went outside to smoke a cigarette. He got into a car to head back to the presidential suite of his hotel.

Cho gazed out the window along the way, but the tension of the afternoon’s meeting on his mind.

“Sometimes,” he said, “I get so frustrated that I am almost half dead.”

***

Around the world, China’s growing appetite for investment is attracting intense scrutiny.

In the United States, lawmakers and regulators have examined several high-profile deals by Chinese investors as potential threats to national security. Regulators held up plans by Chinese insurance firm Anbang to purchase New York’s famed Waldorf Astoria hotel, which often accommodates the president and other dignitaries. They scuttled a bid by a Chinese venture capitalist for a U.S. lighting company owned by Netherlands-based Philips. And lawmakers have called for reviews of a Chinese offer to buy the Chicago Stock Exchange.

Fuyao has not had to confront those concerns, but it has tangled with U.S. regulators in the past over anti-dumping charges that were eventually reversed. Now, amid a presidential election that has often exploited anger against China, Cho said he believes the new factory can help repair relations with the United States.

“A lot of this is politics, obviously. We’re also used to it,” he said. “I firmly believe that ultimately substance will win out.”

Cho has a message for the United States, too: The recession exposed the nation’s fault lines: economic inequality, political gridlock and a widening chasm between the complex financial engineering on Wall Street and industrial production in places like Moraine. The United States will not truly recover, Cho said, until the country is once again making things that are in demand around the world.

“To seek long-term prosperity, the U.S. needs to forge its dream of becoming a power of manufacturing,” he wrote in his autobiography.


 

 

 

 

 


 


 

 

 
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