Closing in

Sandvik workers test a newly developed machine.

After a10-hour flight and two-hour bus drive from Beijing, the quiet Swedish town of Sandviken appears on the horizon. It is the birthplace and global headquarters of Sandvik, a leading global industrial group.

The Fortune 500 company is striving to shorten its distance from China by aggressively expanding its manufacturing capacity and talent pool in the world's fastest growing market.

Sandvik specializes in tools for metal cutting, machinery, mining and construction industries, stainless materials, special alloys, high-temperature materials and process systems.

According to Lars Pettersson, president and CEO of Sandvik, the firm which is more than 140-years old, will grow with China's industrial and engineering tools market, and perhaps even a bit faster than the overall Chinese market.

"Within the next five years, China will certainly be at least the second market (for Sandvik globally)," notes Pettersson, who has been at his current position since 2002 and working for Sandvik for 29 years.

"China is now the fifth or sixth largest market for Sandvik, this is a big development. It was not long time ago that it was the tenth market, it's moving up very quickly," he says.

Sandvik had approximately 47,000 employees in 130 countries in 2007. Sales increased by 19 percent in value to Swedish Krone 86 billion and profit after financial items rose 17 percent to Swedish Krone 13 billion.

Sandvik China notched up 3.8 billion yuan in sales revenue last year, a 20 percent year-on-year growth. With registration capital at 100 million yuan, the company has 25 sales offices and 10 production sites in China. Its sales network covers more than 70 cities.

Production capacity

Entering China in 1985, Sandvik's first industrial plant is still located in Langfang, northern China's Hebei province, where it mainly produces cemented-carbide tools. It is being renovated in order to double its production capacity this year, in a bid to become one of Sandvik's major Asian bases.

The company is also expanding its assembly lines for mining equipment crushers in Jiading, Shanghai. When completed it is expected to be the one of the world's largest crusher assembly plants for Sandvik Mining & Construction.

Three new factories have just been built in Wuxi, Jiangsu province. They are operated by Sandvik's business sectors: Sandvik Mining & Construction, Walter, and Sandvik Hard Materials. Respectively they manufacture cemented carbide tools for mining equipment; design and produce cutting and special tools; and produce cemented carbide wear parts.

According to Svante Lindholm, president of Sandvik China Holding Co, a new plant in Zhenjiang, Jiangsu province will mainly produce high alloy hydraulic and instrumentation works as well as and heat exchanger tubing. The new facilities in China will begin production in the middle of 2009.

"All the materials are imported now, before the establishment of our Zhenjiang plant so we can meet our customers demand locally," says Lindholm.

"Continuing to add to our investments in China is a natural thing, as the country is so big," says Pettersson. "And we expand our production we'll be closer to our customers, shorten our delivery times and overall be very flexible in responding to the needs of our Chinese customers."

Amid the current global financial crisis multinational companies are impacted, but Pettersson says he isn't worried so far.

"Sandvik will be impacted if our customers are impacted. Certainly, we are not immune to the crisis, and nobody is. But we have no financial business and financial customers, so we have no exposure to that crisis now," he says.

Most of Sandvik's products in China are for local consumers and the huge demand for infrastructure and construction in the emerging market will guarantee the company's future here. To date, only 30 percent of Sandvik's products used in China are manufactured locally, thus the production capacity expansion potential is large, Petersson says.

Statistics from the National Bureau of Statistics show that total investment in fixed assets, including infrastructure and construction, in China amounted to 13.72 trillion yuan last year, up 24.8 percent by 2006. And the annual growth rate stood at over 20 percent so far in the 21st century.

Pettersson says domestic and foreign competitors in the Chinese market encourage rather than discourage Sandvik. "That's a good thing, competition results in improvement and better products and services for customers," he says, adding that Sandvik has segmented the market and is niche oriented.

Talent pool

Swift expansion of Sandvik in China also depends on its talent pool growing.

Recruiting in China is a priority in for Sandvik, which looks for talented people, provides education and training, and places them in the fields where they can support the customers, introduce new technologies and give advice on what improvements can be made.

"This is the way we build relations greatly and gradually with our customers in China," says Pettersson. "Our challenge, quite frankly is to find, recruit, train and keep as many young talented people as possible."

Sandvik China's Lindholm says that when the company is selling products, it is also selling productivity. In order to sell productivity, it needs to have interaction, communication and a direct relationship with its customers, which require a superior sales and engineering staff.

Sandvik also needs high-quality research and development talents.

Many Chinese engineers and technicians have been sent to Sweden or Sandvik's plants around the world for professional training.

As a stimulus to attract and retain the employees, Sandvik China recently initiated a corporate pension plan and has signed a corporate pension plan agreement with Taiping Pension Co, which helps invest and operate the fund.

Under the plan, the company and each of their employees contribute 7 percent and 1 percent of the staff's wages every month to their pension fund pool. So far, the plan has covered 97 percent of the company's 1,500 contracted Chinese employees.

"It takes us years and years to train our people, and they are assets that are much more valuable than anything else," adds Lindholm.

(China Daily 11/10/2008 page7)