Return to 1958 and build a century-old giant

Chapter 873 Negotiations on Automobile Cooperation

The specific details of the Deep-Sea Science and Technology University cannot be finalized so quickly, but once the general direction is determined, there are no more problems.

Once the approval is granted on the mainland, his funds will be in place. At the very least, we can start by demolishing the site and preparing the foundation. Some minor issues can be discussed gradually, and some can even be discussed after the university is built.

After all, a university doesn't need to be able to enroll full students immediately when it's established; it's like a factory, which can start with small-scale trial production, and then proceed on a large scale once it's confirmed to be working properly.

On November 20, Yang Wendong arrived at the Very Cola factory in Chaoyang District in the morning. At that moment, the factory was already bustling with activity, with many trucks queuing at the gate, waiting to be shipped.

Looking at the various types of trucks, Yang Wendong asked Ye Zhiqing, the factory manager, "Aren't you using container shipping?"

Ye Zhiqing replied, "No, we tried before, but it didn't work. One reason is that there is a shortage of container trucks in the mainland, and it is difficult to find them. The second reason is that the roads in Yanjing can handle container trucks, but they cannot be used in other cities or outside the city."
Therefore, the current transportation of goods leaving the factory is still mainly by small trucks, but no matter where the destination is, we still try to use waterways to reduce costs. This is also the main mode of transportation in China, or occasionally by train.
However, resources were scarce on both ships and trains, and our drinks weren't exactly necessities, so we were frequently delayed.

“I can’t do anything about trains, but as for shipping, how about we get some smaller boats from Hong Kong?” Yang Wendong countered.

Shipping companies don't all use large ships; for some short-distance transport, they mainly use small boats. Of course, Changxing Shipping doesn't have many of these small boats, but the inland areas don't need many either.

Ye Zhiqing shook her head and said, "It won't work. Shipping resources are also controlled by the state, and foreign capital cannot get involved unless you use your connections, but that's a bit unnecessary. This kind of thing doesn't actually have a big impact on us, because our Coca-Cola is also in short supply. It's just that it often can't be delivered to its destination on time."

"That's not how it works. Even if it doesn't affect our production, we still need to provide the best service." Yang Wendong shook his head and said, "Changing the law is indeed unrealistic, but we can work around it."

If we can't get involved, then you should contact China Resources and see if they have any solutions, such as a joint venture or asking them for help. We need to ensure that our goods arrive at the customers' hands on time, otherwise it will also affect the number of orders.

Even if we are currently experiencing supply shortages, we can certainly consider expanding production. Don't assume we will monopolize the market. As far as I know, Coca-Cola and Pepsi are also planning to build factories in mainland China, so we must pay attention.

Although they have gained an early advantage in the mainland cola market, both Coca-Cola and Pepsi are century-old companies with strong foundations. In the future, there will inevitably be fierce competition in the mainland market, so they need to prepare in advance.

"Yes, Mr. Yang, I'll get ready to go to China Resources right away," Ye Zhiqing said quickly.

Yang Wendong added, "Also, go to CCTV. They've started reforms there and are accepting advertisements from outside. Go and secure some evening or nighttime slots. Don't be stingy with the money. The ads need to be broadcast in rotation. I want all television viewers across the country to know about our Very Cola."

During this era, the main television station in China was CCTV. Some provinces also had their own television stations, but their production capabilities were far inferior to those of CCTV.
Ye Zhiqing said, "Mr. Yang, there aren't many people in the mainland who own televisions yet. Should we also consider advertising in newspapers or on the radio?"

“Okay.” Yang Wendong nodded and said, “In addition, you should prepare the next phase of the factory plan as soon as possible. Once the promotion starts, sales in various places will definitely increase significantly. You also need to make preparations for transportation.”

“Okay, Mr. Yang,” Ye Zhiqing replied happily.

Yang Wendong said, "Yes, the beverage industry will be one of my core industries in the mainland in the future. It will start with Very Cola. You can do some research on the funding needs in all aspects first. If there are no problems, the headquarters will approve it."

The characteristic of the beverage and food industry is that if you make a good product, it is much easier to enter other competitors.

In their previous lives, mainland China's Master Kong and Wahaha were the same.

Although his prophetic skills are not very useful in terms of operation in this industry, in a blank market, as long as he gains a first-mover advantage and doesn't make mistakes later, he can basically establish himself.

"Thank you, Mr. Yang," Ye Zhiqing said with a smile.

Yang Wendong said, "Okay, let's do it this way then. Just make preparations for expansion in all aspects."

Next, Yang Wendong toured the factory with Ye Zhiqing and the others, and learned about what is now known as the most modern beverage factory in mainland China. Although it is not as advanced as in his previous life, many operations are still done on an assembly line.

Ye Zhiqing also explained: "The mainland side hopes that we can create more jobs, so they have subtly suggested that we should not use too many assembly line equipment. However, after consideration, we still cannot do it, because not all products can be differentiated from assembly line production by using low labor costs."

"There will always be marginal utility; the assembly line will still be an assembly line," Yang Wendong said with a smile.

In some industries, assembly lines are highly efficient, such as beverages. From the initial production of plastic bottles to subsequent cleaning, filling, and sterilization, manual operation is too slow. Even if labor were free, the cost would still be higher than that of an assembly line.

Ye Zhiqing said, "Yes, but the instant noodle factories in Shanghai have reached an agreement with the Shanghai Municipal Government to minimize the use of assembly line equipment and increase employment. The instant noodle factories are able to achieve this."

"Yes, I know about this. I'll go to Shanghai to take a look when I have the chance in the future," Yang Wendong nodded.

He doesn't really interfere much with the factories of his subsidiaries; they usually make their own decisions and then report on major events periodically.

It's precisely because the factory in mainland China has just opened that he's paying more attention to it; otherwise, he hasn't been to the beverage factory in Hong Kong for a long time.
With so many factories under its umbrella, including many overseas, it would take him months to visit them all if he went every day. He simply doesn't have that kind of time. However, given its first-mover advantage, as long as it develops steadily, it will definitely be able to capture a portion of the future mainland China cola market.
Although the profit margin in the cola industry is very low after competition, the market is large enough that the final profit is still considerable. Once cola succeeds, the channels and brand will become even more valuable.
However, Yang Wendong was too lazy to check the factory's actual operations. He could leave such matters to his auditing department. At least for now, the beverage industry in mainland China didn't have much profit. It was only because it was a pioneering market with unlimited potential that Yang Wendong paid attention to it.

At 1 p.m. that day, Yang Wendong first met with the mini team that had come from the UK, and then went to the headquarters of the First Ministry of Machine Building located on Sanlihe Road in Xicheng District.

The leadership of the Ministry of Machine Building also came to the entrance of the office building to greet them, and Yang Wendong got to know the group.

Later, Yang Wendong also visited the headquarters of the First Ministry of Machine Building, especially one of its laboratories, which contained a 30-year history of the development of the mainland automobile industry, with various models recording the development process of the automobile industry after the founding of the People's Republic of China.

Yang Wendong was unaware of this, but after listening to the explanation, he learned about this period of history.

"It seems there's a higher demand for trucks and buses in China," Yang Wendong said.

Director Zhao, who was accompanying them, replied, "Yes, trucks and buses are means of production that can create value, which is what we need most. In fact, we also want to introduce overseas technology, but negotiations in this area are even more difficult than those in automobiles, and there has been little progress."

"Yes, I've heard about that too." Yang Wendong nodded.
In the truck sector, the market size is smaller than that of automobiles, but for the current domestic market, it is definitely more important.
He also investigated with Goldman Sachs which car companies of this type were willing to sell, but there has been no progress.
Even if he has the money, there's nothing he can do if others won't sell. As a Hong Konger, he can't launch a hostile takeover campaign overseas like he did against British-owned businesses in Hong Kong.
It's not that there's a lack of money, but rather that this type of truck industry has many cooperative relationships with the local military, making it extremely difficult for foreign companies to acquire it. Similarly, while it's easy for domestic companies to cooperate with Western automotive companies, it's very difficult to cooperate with truck companies, and this factor accounts for the majority of the problem.

After all, trucks and tanks are closely related, their engines can even be shared, and they are even closely related to missiles. Therefore, in the past, Western countries only exported finished products to their own countries.

Director Zhao didn't think much of it and said, "Over there is our vehicle information, Mr. Yang, please take a look."

After another round of introductions, the group finally arrived at a conference room upstairs. A dozen people sat down, with the leaders from the mainland on one side and Yang Wendong, his assistant, and people from Mini UK on the other.

“Mr. Yang, regarding the previous cooperation between Mini and the domestic side, we have discussed many issues with the British side, and most of them have been resolved. There are still a few remaining that require your confirmation,” Director Zhao said.

Negotiating cooperation with Chinese companies is highly efficient. With Yang Wendong's authorization, Mini UK is also pushing this matter forward with all its might, and the two sides have reached an agreement on many points.

Yang Wendong said, "Please speak."

Director Zhao said, "The first issue is the localization rate. We hope to achieve an 80% localization rate within 5 years, but the British side believes that it is impossible."

“I know about this problem,” Yang Wendong said. “I also hope that the domestic production rate can be increased quickly, because this can reduce my costs, but this is not something we can decide, but rather something that the mainland side can decide.”

My people investigated many local auto parts suppliers and their products, and found that their quality was truly subpar, and their standard procedures were not being followed properly. Since automobiles are safety-related components, if your factory cannot produce suitable products, we will not agree to a forced substitution.

Even if we don't say it's 1980 now, even in 1985, Volkswagen's domestic suppliers couldn't produce parts that met Wolfsburg's requirements for several years and had to import them.
Ultimately, it was the government's forceful administrative order that required major enterprises to overcome the bottlenecks, and it wasn't until the early 90s that the domestic production rate improved somewhat.
Director Zhao and the others' expressions changed, and they said awkwardly, "We know that too, but we need to have a chance to try in order to succeed, right?"

Yang Wendong shook his head and said, "There's no room for discussion on this point. I don't agree either. I can't use cars to test the waters. This industry is either successful or it's not. There's no middle ground."

However, there are other ways. I think Director Zhao should know that my Hong Kong financial company has a mainland investment fund that can help suitable factories make investments. This way, your factory can also obtain foreign exchange, thereby improving its technology and quality.

I can get Hong Kong to allocate some investment resources to Yanjing's auto parts industry; that's the limit of what I can do. Otherwise, we probably won't be able to reach an agreement on this.

If it's a home appliance, as long as it doesn't involve the risk of electric shock, then it's okay to take a little more risks and give domestic manufacturers more opportunities. After all, the market is in China, and if there are any problems, just do a good job with after-sales service.
But the automotive industry is different. A car has tens of thousands of parts. If one part malfunctions, it could cause a safety accident. How could he dare to gamble?

What's even more critical is the instability of domestic factory production. In other words, they can't produce products of the same size in the same batch. What's the point of doing this?

Several leaders on the domestic side discussed amongst themselves in hushed tones. After a while, Director Zhao said, "Alright, we can do CKD assembly in the early stages. Later, our factory will handle the funding from Hong Kong, and we also hope that you can provide some technical support."

"Don't worry, I'm also in business, so naturally I hope for localized production. Otherwise, with the cost of this kind of CKD, it would be difficult for domestic consumers to afford it, and we can't export it either. We also can't balance our foreign exchange reserves," Yang Wendong nodded and said.

He is different from other large car companies, such as Volkswagen. He plans to assemble cars in mainland China, but purchase all parts from Germany. In this way, even though the joint venture nominally only has a 49% stake, the profit control can actually reach 70% or 80%.

Yang Wendong hopes to make China his production base, which naturally requires localization. After successful localization, he will even export to the UK. He will have 70-80% of the profits, but the rest will stay in China, instead of going abroad like other joint venture car companies.

Anyway, when he promised Thatcher he would guarantee Mini's employment, it didn't include suppliers. As long as the quality on the mainland side was fine, he was prepared to gradually switch.

Director Zhao continued, "Alright, let's discuss the second question now."

Yang Wendong listened attentively. In such a large industry as automobiles, it's normal for problems to arise in cooperation between the two parties. The sooner these problems are raised, the better, as it's much more convenient than if they occur later.

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(End of this chapter)