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How would Yin Tongyao succeed, after Zhan Xialai?

Yin Tongyao, 43, a native of Anhui, has worked closely with fellow Anhui native Zhan Xialai for the past nine years. Together, they have created a miracle of sorts in China¡¯s automotive industry: the building of an independent carmaker called Chery Automobile.


Since February, however, Yin Tongyao has had to lead Chery without Zhan Xialai, who was branded a ¡°red-capped businessman¡± (a businessman with an official background) and forced to leave Chery. As the Party chief for the City of Wuhu, it was against regulations for him to simultaneously function as the chairman of a business corporation. 


Yin, who began his career as an engineer, was accustomed to working in the shadow of Party Secretary Zhan, one of Chery¡¯s founders who long-cherished the dream of car making. Now that Zhan is gone, Yin has been pushed reluctantly into the limelight as chairman and CEO of Chery Automobile.


How would Yin, a rookie CEO, guide Chery on its fast-expanding path?


¡°Ours is an abalone, theirs is hot pepper plus dry bean curd¡±


Compared with ¡°auto fanatic¡± Li Shufu, chairman of Geely Holding, China¡¯s first private carmaker, Yin Tongyao, who always wears work clothes, is more like a well-behaved model worker. But on the topic of automaking, the two men are similarly ¡°fanatic¡± and ¡°arrogant.¡±

For example, Chery makes a car called the ¡°Son of the Orient.¡± The car is powered by a Mitsubishi engine, but beginning from October 2005, the ¡°Son of the Orient¡± is powered by Chery¡¯s own engine. ¡°Our engine is abalone,¡± Yin told the reporter, ¡°theirs is no more than hot pepper plus dry bean curd.¡± (In Chinese cuisine, the abalone is a rare and highly valued sea delicacy whereas hot pepper plus dry bean curd is cheap and common staff – Editor).


Asked about whether there are people he admires, Yin was at a loss to name one in the auto industry. But outside the industry, he said he admires Zhang Ruimin of Haier Group, Ren Zhengfei of Huawei and Liu Chuanzhi of Lenovo.


¡°I admire people who sell Chinese products overseas and make the Chinese voice heard in the rest of the world,¡± he said. ¡°When we have 100 or 1,000 companies like Huawei, our country will be really strong.¡± He lamented that there are too many gutless people in China.


If you ask Yin why he is so dedicated to developing independent vehicle brands, he would say: ¡°I want to be a Chinese with guts.¡± And that is perhaps why nine years ago he defected to Wuhu from FAW-Volkswagen, a Sino-German joint venture in northeast China, where he worked as director of the general assembly plant. At the invitation of Zhan Xialai, who was then a deputy mayor of Wuhu and was at the point of launching the Chery project, Yin returned to his hometown.


Yin Tongyao described Chinese-foreign joint ventures as ¡°puppet armies,¡± such as those in the occupied areas of China during the Anti-Japanese War.


¡°Personally, it would have been much more comfortable for me to work as a puppet solider than as a soldier of the allied army,¡± he said. ¡°But when national interests are taken into account, it is better for me to leave the puppet army and work in our own camp.¡±


On the matter of carmaking, Yin maintains that the Chinese should not only seek independence but must also cooperate with one another. It causes serious waste if independent-minded enterprises all try to do one and the same thing individually.


¡°We were the earliest to seek cooperation with others,¡± Yin said. Chery has discussed cooperation with Brilliance China, Hainan Mazda, Jianghuai and Nanjing Automotive. Yin revealed that, at a secret meeting in Hainan during the May Day holiday of 2003, Chery, Brilliance China, Hafei and Hainan Mazda discussed matters concerning cooperative procurement and vehicle development.


¡°Since we are all contracting AVL of Austria for engine development, why shouldn¡¯t we negotiate with the Austrian company as one team and save on development costs?¡± Yin asked.


The meeting failed to produce any result. ¡°Resistance came from a few big enterprises, which did not want us to grow big,¡± he said.


But with or without future cooperation, Yin is adamant about making cars independently. ¡°We should not follow in the footsteps of South America,¡± Yin said. ¡°The auto industry there is like a cloud which blows away when the wind comes. Their automobile industry there has no roots. Independent R&D and your own brands are the roots.¡±


Yin maintains that the purpose of cooperating with a foreign carmaker is to seek independence. ¡°Although equity shares in a joint venture are 50:50, the Chinese side is not equal. In our cooperation with  the Germans, plane tickets were bought and documentation prepared for their pet dogs. More money was spent on a dog from Germany than on a Chinese traveling to Germany for training,¡± Yin said.


¡°We should be happy and clap our hands when Chinese businesses grow, whether it is Geely or someone else,¡± he said.


At a recent business forum held in Guangzhou, Long Yongtu, secretary-general of the Bo¡¯ao Asia Forum, and He Guangyuan, former minister of the Machinery Industry, had a heated argument about whether or not China needs product development capability and independent brands. Yin felt scandalized. ¡°This is unbelievable! Does this need discussion?¡± he asked.


A dismal year


At the beginning of 2004, Yin promised that Chery¡¯s car sales would double to 180,000 units from the little more than 90,000 units in 2003. Unfortunately, he was dogged by one piece of bad news after another. His predecessor, Zhan Xialai, was forced to resign, the lawsuit brought on by General Motors for copying a GM-Daewoo model was pending, and a parts maker stopped supplying Chery with products. ¡°From July, sales kept dropping,¡± Yin remembered. By yearend calculations, Chery had sold just 87,000 cars in total. ¡°It was a disastrous year,¡± Yin said.


Plummeting sales led to acute financial difficulties. Chery used to have only accountants but no financial officers. Yin admitted not knowing the difference between short-term and long-term loans. Not until Chery poached the chief financial officer of a foreign business did he know that it is dangerous to launch a long-term project with short-term loans.


The market was changing and prices of cars were dropping, but Chery¡¯s investment kept growing in scale. According to Yin, not knowing the company¡¯s financial situation, people at lower echelons of Chery continued their spending spree, often buying the best equipment for expansion projects. Chery began borrowing money from the bank and Yin got worried. ¡°I can¡¯t sleep at night because of the bank loans,¡± he said.


Since leading Chery without Zhan Xialai, Yin has found disturbing changes in the thinking of the workforce. Chery¡¯s workforce has grown from a little more than 4,000 several years ago to over 9,000 now, who average 29 years in age. Seventy percent of the managerial staff used to work as engineers or technicians, but the situation is different now.


According to Yin, fast growth of the company in the previous couple of years has brought about complacency among the workforce. Yin sends people to Haier Group every year to learn managerial skills, and in the past, returnees were wont to talk about Haier¡¯s strong points and Chery¡¯s shortcomings. But last year all the returnees talked about were Haier¡¯s weaknesses. ¡°I am disappointed at this,¡± Yin said. ¡°It shows that something has gone wrong with our people¡¯s thinking.¡±


Chery faces two options, to be the ¡°chieftain of a mountain stronghold¡± (success on a small, localized scale) or to conquer the world, Yin said. To choose the latter option, Chery staff and employees need to change their mindset.     In the dismal year of 2004, Yin had to face unhappy shareholders in his capacity as board chairman. He had nothing to say when criticism came from the provincial authorities. ¡°I can¡¯t explain away problems. An enterprise speaks with performance. Yes, the market was sluggish last year, but there were still enterprises that reported good performance, such as Guangzhou-Honda. Our problem is rooted in ourselves,¡± Yin said.


Throughout 2004 Yin felt as if he was taking a lesson and having a test every day. ¡°My great reward during the year,¡± he said, ¡°was that I acquired the basic knowledge about cost control, investment analysis and risk management.¡± But Yin realizes that he is not yet up to the job of leading a fast-growing Chery. 


Looking for somebody who is stronger than I


To swell the talent pool for Chery, Yin has been recruiting people with expertise by hook or by crook. Chery¡¯s successful recruitment of Terada Shinji, a Japanese management expert, testifies to Yin¡¯s patience, sincerity and persuasive power in recruitment. For many years, Yin served as deputy general manager, leaving the top job for someone who was more qualified than himself.


But that ¡°someone¡± is hard to come by. ¡°Chery is now an enterprise of considerable size. I may not be qualified for the top job, but it is difficult to find someone who is really qualified. Even if we do find a qualified person, he/she may not be willing to come,¡± Yin said.


Yin is now Chery¡¯s CEO, but he has not given up looking for one who can replace him. ¡°I am not CEO material,¡± he said. ¡°When we do find a real entrepreneur to take the reins of Chery, I may be able to devote more time to R&D and quality control, areas that I am good at and more interested in.¡± But this has not prevented Yin from learning diligently so that he may better lead the carmaker. ¡°I¡¯m eager to improve myself, to become a qualified, strong administrator, like Zhang Ruimin of Haier,¡± he said.


Translated by Raymond Chen

based on the author¡¯s article published in Zhongguo Qiyejia (China Entrepreneur)

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