Reforms prompt turnaround
Chen Xuefeng, president of Yongcheng Coal and Electricity Group Co Ltd, briefs Xu Guangchun, secretary of the Henan Provincial Committee of the Communist Party of China, on the company's production. |
The company's revenue reached 21.53 billion yuan in 2006, growing 79.7 percent year-on-year, and its profits amounted to 2.05 billion yuan, a surge of 58 percent year-on-year.
Yongcheng Group's total assets are currently worth 17.38 billion yuan, 4.8 times the level of 3.6 billion yuan in 2000.
Yet, the company's performance has not always been so strong.
When it was established in 1997, the young coal maker had a bumpy start, operating at a loss.
Despite expensive imported mining equipment, its coal output lagged behind others in the industry. Its worst econimc situation was in 2000 when the group company incurred losses of 120 million yuan, with a debt ratio of 98 per cent
However, a dramatic change took place when Chen Xuefeng assumed office as company president the following year.
The new president launched a package of production and management reforms, triggering a turnaround.
At Chen's request, industrial experts conducted on-the-spot research on the company's mines and proposed an innovative mining method targeting their particular geological conditions.
In accordance with the experts' proposal, Chen and his team overhauled mining machinery and technology, adjusting them to local physical mining conditions.
As a result of these measures, the company's coal output has increased five-fold in the past six years.
Chen's reforms also sparked a change in workers' attitudes toward product quality.
In the past, despite the knowledge that lump coal is priced much higher than slack coal, workers still seemed indifferent to rough handling, reducing much lump coal to slack coal.
In front of a general assembly of the company's staff, Chen dropped a lump coal onto the ground, saying: "What is a tragedy? It is destroying beautiful things like this; the coal that would otherwise sell at at least 500 yuan per ton cannot even be worth 200 yuan after it is broken into pieces. We will not be creators of such a tragedy."
The group company started a new salary system, linking employees' pay with product quality.
Chen also pursued a market-stimulated approach to dealing with relations between departments and workshops of the company, in which each department is responsible for the next link in the production procedure, as if serving and trading with customers in a real market.
The market-oriented practice stimulated self-policing among workers and also helped uplift their collective spirit.
"Management is more than just laying down rules in words," Chen said. "It is supposed to spark a change in the way people think so as to ramp up production."
Meanwhile, the group company also formulated a new development strategy.
While still focusing on coal and related industries, the company expanded its business to other fields.
Sales revenues of nonferrous metal alone contributed a quarter of the company's total sales income last year.
To fuel further development, the company's executives paid more attention to capital management.
So far, Yongcheng Group has cooperated with more than 60 strategic investors, three of whom are in the Fortune Global 500 list and six are among the top 500 Chinese companies.
The company has so far secured investment pledges worth 11.54 billion yuan.
With such leveraged capital, the company has held a stake in 21 projects at a ratio of 1:5.8 between invested funds and controlled capital, and thus received 12.78 billion yuan in fresh revenue.
(China Daily 03/16/2007 page19)
