In Hong Kong, we build a global business empire

On the street outside 10 Downing Street, Lin Haoran and Bao Yugang walked side by side.

This area is the core government district; the streets are quiet and solemn, and there are no security issues.

"Uncle Bao, do you think this matter can be finalized?" Lin Haoran asked.

He rarely had contact with the British government, so he didn't really understand the British government's way of doing things.

On the contrary, Bao Yugang has dealt with the British government for more than 20 years and must be very familiar with the logic and unspoken rules of the system.

Bao Yugang did not answer immediately, but took a few steps before slowly speaking: "Haoran, as far as I know, Margaret Thatcher has been pushing for the privatization of state-owned enterprises for four years now."

They were very cautious during those four years, as the slightest misstep could have triggered large-scale social unrest.

After four years of consolidation, and with Thatcher's prestige and control at their peak, she needed more than ever a landmark success story to prove the correctness of privatization reforms.

He paused for a moment, then continued, "The Leland Group is exactly the most suitable breakthrough point. It is large enough, has suffered serious losses, and has attracted enough social attention."

If the core assets of the Leyland Group could be successfully privatized, it would be a reform achievement that Margaret Thatcher could demonstrate to Parliament and the public.

Therefore, from a political perspective, she has sufficient motivation to push this forward.

Lin Haoran nodded upon hearing this.

Hopefully everything goes smoothly; after all, he doesn't want to have made a wasted trip.

After saying goodbye to Bao Yugang, Lin Haoran returned to the Mandarin Oriental Hotel.

As night deepened, Lin Haoran stood before the floor-to-ceiling windows of the presidential suite on the 36th floor, overlooking this ancient yet modern city.

The London nightscape unfolds beneath my feet, the Thames River meanders like a black ribbon through the brightly lit city, and the dome of St. Paul's Cathedral gleams softly in the moonlight.

Liu Xiaoli walked over and draped a jacket over Lin Haoran, then stood beside him, also looking out at the night view.

Before he knew it, Lin Haoran had spent his first night in England in London.

In the morning, the sunlight streamed into the room through the French windows. When Lin Haoran woke up, the London sky was a clear, pale blue.

The gloom and chill of last night have been dispelled, and the sunlight shines on the Thames, creating shimmering golden waves.

I must say, the view from a high place is truly magnificent.

He stood by the window for a while, then washed up, changed his clothes, and went down to the hotel restaurant for breakfast.

After breakfast, news came from downstairs that a government-sent car had arrived at the hotel entrance.

Last night, when discussing the Leyland Group, Minister Lawrence suggested that Bao Yugang and Lin Haoran be arranged to inspect several of the Leyland Group's key factories today.

The core territory of Leyland Group's major brands is mainly concentrated in the triangle formed by the three cities of Birmingham, Coventry, and Solihull in the West Midlands of central England.

This is the heart of the UK's traditional automotive industry, concentrating more than 70% of the country's vehicle production capacity and R&D resources.

Only top luxury brands like Rolls-Royce and Bentley have operations in Crewe.

Lin Haoran had originally planned to inspect his businesses in the UK today, but since Minister Lawrence had arranged for him to visit the Leyland Group's factory, Lin Haoran was naturally happy to accept.

His original purpose for coming to the UK was to visit the car brands under the Leyland Group, so he naturally wouldn't miss this opportunity.

Seeing these factories in person is more convincing than any report.

As for his own businesses, he can inspect them whenever he wants; he's not in a hurry.

After leading Li Weidong, Li Weiguo, and Liu Xiaoli downstairs, they walked out of the hotel entrance, where a black Rolls-Royce and two Rover cars were already parked.

The driver, dressed in uniform, respectfully opened the back door and said, "Mr. Lin, Minister Lawrence sent me to pick you up. Sir John Paulson is already waiting for you in the car."

Lin Haoran nodded, gesturing for Li Weidong and the others to get into the car behind, while he got into the Rolls-Royce.

Bending down to get into the car, Bao Yugang was indeed already sitting in the back seat, holding a map and looking at the route.

Seeing Lin Haoran enter, he put down the map and smiled, "Minister Lawrence has made very thoughtful arrangements. Today, he's letting us go directly to Birmingham and Coventry to take a look."

"That's perfect. Seeing the factory with your own eyes is more practical than anything else," Lin Haoran nodded and smiled.

The convoy slowly started, passed through central London, and headed northwest along the M40 motorway.

The view outside the window gradually changed from the dense urban area to the open countryside, with green fields and scattered villages all along the way.

About an hour and a half later, the car entered Birmingham city.

Unlike the glitz and sophistication of London, Birmingham has a more rugged and industrial feel.

Red brick buildings, old factories, chimneys, and railway lines are interspersed together, and the air seems to still retain the atmosphere of the industrial era.

The car drove through the city and finally stopped in front of a factory that looked quite old.

The factory's exterior walls are made of red bricks, with tall windows and a typical sawtooth roof structure. The iron frame on top is rusty, but you can still see the grandeur of its original construction.

The sign at the entrance reads in large letters: "Austin Motor Factory - Longbridge Factory".

Lin Haoran got out of the car, looked up at the building, and felt a strange, indescribable feeling welling up inside him.

This is Austin, the birthplace of MINI, and one of the heartlands of the British automotive industry.

Although it is somewhat dilapidated now, he can imagine the glory of this place decades ago.

“Mr. Lin, Sir John Paul, welcome to the Longbridge factory. I am Harrison, the production director of Leyland Group. I will be showing you around today.” A middle-aged man in a suit strode out of the factory area.

Lin Haoran and Bao Yugang shook hands with Harrison and followed him into the factory.

The factory interior was much more spacious than the exterior, with rows of production lines under the tall roof. However, only about half of the production lines were in operation at the moment, and many workstations were empty, making it seem rather deserted.

As Harrison led Lin Haoran and the others along, he explained, "Currently, the capacity utilization rate of this Changqiao factory is around 60%, mainly producing multiple models of the Austin and MG brands, with a monthly output of approximately 6,000 vehicles."

"We also have two production lines that are idle, but we can resume production at any time if we get enough orders," Bao Yugang said with emotion in Hong Kong dialect. "I came to inspect the area a few years ago, and at that time, our capacity was still at 70%. Now, a few years later, it has dropped by another 10%, and that's after we restarted the MG brand production line."

Lin Haoran smiled and nodded in agreement, "Yes, the British car industry declined too quickly, otherwise it wouldn't have been our turn to acquire it."

They were speaking Hong Kong dialect, which Harrison, the production director of the Leyland Group, couldn't understand, so he continued explaining as usual.

Lin Haoran's focus was not on Harrison, but on carefully observing the assembly lines.

The British automotive industry is a highly mature and top-tier industry globally. Although it has declined in recent years, its industrial foundation remains solid, and these technologies are exactly what the mainland needs most.

In this day and age, although there are many automobile factories in mainland China, such as SAIC, Hongqi, GAC, Dongfeng, and Hongxing, most of them imitate mainstream models, with extremely low production volume, and they only circulate within the local administrative system.

As for the technical aspects, there's not much to say. The overall level is almost 20 to 30 years behind the international advanced level. The technology is outdated, the production process is crude, and it is highly dependent on manual labor.

With such a level of technology, the products produced are not only unsuitable for export to European and American markets, but even the Southeast Asian market doesn't value them.

Therefore, his initial acquisition target was very clear: he didn't want a few old production lines, but a complete automotive industrial technology system.

The so-called technology system includes production capacity R&D processes, engineering design standards, supply chain management methods, quality control systems, marketing strategies, after-sales service standards, and most importantly, talent training mechanisms.

These are the true essence of the British automotive industry accumulated over a century.

The reason why the British automotive industry could not compete with Germany and Japan in this era was not essentially due to a lack of technological research and development. On the contrary, it still maintained a world-class technological foundation. The reason why it suffered repeated defeats in the market was ultimately due to problems with management and cost control.

For example, British car workers are paid far more than those in Japan and Germany, but their production efficiency is far lower than their competitors. This results in excessively high production costs, giving them no advantage over cars in the same price range.

Furthermore, the powerful influence of the guilds made it almost impossible for the management to implement any substantial reforms, the rigid employment system prevented the company from flexibly adjusting its personnel structure, and long-term losses led to a serious lack of investment in research and development, creating a vicious cycle.

But the technology itself is not outdated, and that's what Lin Haoran truly values.

He stood in the final assembly workshop of the Changqiao factory, looking at an Austin car that had just rolled off the production line, but his mind was already thinking about things three or five years from now.

The acquisition of these brands and factories was never intended to continue a loss-making automotive business in the UK, but rather to gradually transplant the century-old technology, craftsmanship, management experience, and brand assets to the mainland.

“Mr. Harrison, I would like to understand the cost structure of the Austin model,” Lin Haoran said.

“We do cost analysis every year. For example, this Austin Maestro that just rolled off the production line currently costs about £4,500 per vehicle. Of that, labor costs account for about 30%, raw material costs account for 40%, management costs and equipment depreciation account for 20%, and other costs account for 10%,” Harrison replied.

"So what is the approximate cost per bike for our competitors?" Lin Haoran continued to ask curiously.

Harrison paused for a moment, then said, "The Austin Maestro's competitors are the Volkswagen Golf and the Toyota Corolla."

As far as I know, the cost of a golf ball is around £3,200. The main difference lies in labor costs. Our workers are paid about 1.5 times more per hour than German workers, but our productivity is only 70% of that of German workers.

Compared to Toyota in Japan, British cars have more than double the wages of their workers, but the efficiency gap is even greater. This is why British cars have no competitiveness in the international market and now rely mainly on British consumers to buy them out of nostalgia.

For cars in the same class, those made in the UK cost significantly more to produce than others, and the price can't be set too high, otherwise no one will buy them, and profit margins will be squeezed to almost nothing. Where will the money come from to invest in research and development?

After listening to Harrison's words, Lin Haoran remained silent for a moment, then continued to ask, "So, if we can increase production efficiency and reduce labor costs, Austin's competitiveness can be restored?"

“That’s true in theory, but it’s very difficult in practice. Unions won’t easily accept any reforms that might affect employment, and management doesn’t have enough courage and resources to push for reforms,” Harrison said with a wry smile.

Lin Haoran nodded. He understood this point. These workers were used to high wages, so naturally no one would be willing to take a pay cut.

"Then why not build factories in low-cost overseas markets like Volkswagen and Toyota?" Bao Yugang asked at this point.

Harrison paused for a moment, then gave a wry smile and said, "Building overseas factories? This idea has been proposed by people within the Leyland Group. As early as the mid-1970s, some executives suggested transferring some production capacity to Spain or Ireland to take advantage of the lower costs there compared to the UK."

However, each time this proposal was put forward, it was met with a strong reaction from the unions, who believed that it would sell out the jobs of British workers, and the management was also worried that it would trigger a large-scale strike.

Furthermore, since Leyland Group is a state-owned enterprise, any decision involving the relocation of production capacity requires government approval. The government, however, is hesitant to offend the labor unions, so the proposal was repeatedly shelved, and eventually, no one brought it up again.

"Mr. Harrison, if the new boss decides to build a factory overseas, will the union object?" Bao Yugang asked the question Lin Haoran wanted to ask.

Harrison remained silent for a moment, seemingly weighing how to answer the question.

As a senior executive of the Leyland Group, he naturally knew that Bao Yugang was a potential buyer of some of the Leyland Group's brands, so he was not surprised that Bao Yugang asked this question.

"Sir Bao, Mr. Lin, to be honest, if the new boss simply moves the production capacity away and leaves behind an empty factory, the union will definitely do everything in its power to stop it, including strikes, demonstrations, media exposure, and any other means."

However, if the new owner can come up with a clear transformation plan that shows the workers the future direction of the factory, the situation will be completely different.

For example, the Changqiao plant was transformed into a high-end vehicle production base and R&D center, retaining core positions while promising to provide retraining opportunities for workers willing to switch jobs.

"What workers fear most isn't change, but being abandoned. As long as they feel they still have a future, they won't block the way," Harrison said.

"Haoran, what do you think?" Bao Yugang turned to look at Lin Haoran and asked.

Lin Haoran laughed and said, "This is actually not a problem. I have seen the data. The total number of employees in the entire Leland Group has decreased from more than 20 in 1975 to about 12.5 today. A lot of people have been laid off over the years."

If we only consider the total number of employees at Austin, MG, and Land Rover, which is around 5, it wouldn't be difficult for us to retain some positions in the UK and reassign the rest.

After the acquisition, we will definitely try to increase sales. At that time, our production capacity in the UK won't be affected much; in fact, we'll likely expand production. The models produced overseas will be sold in a completely different market than those produced in the UK, so there won't be any competition.

Upon hearing this, Bao Yugang's eyes lit up; that made sense.

The most important reason why Leyland Group has difficulty building factories overseas is that its sales are declining and the production capacity in the UK cannot meet the demand. Therefore, the management has no confidence to consider building factories overseas, which will eventually create a vicious cycle.

Unlike Lin Haoran and Bao Yugang, their primary goal after taking over was to revive sales.

At that time, we can take advantage of the low-cost production bases in mainland China to drive down prices and regain the market share that Japanese and German cars have taken away.

As long as sales increase, the UK's domestic production capacity will not be weakened; on the contrary, it may receive more orders due to the overall improvement in brand influence.

At that time, the UK factory can focus on producing and selling models for the UK domestic market, while the overseas factory will be responsible for sales in overseas markets. The two will each perform their respective duties without conflict.

Both Lin Haoran and Bao Yugang wielded considerable influence in Hong Kong, Macau, Southeast Asia, and mainland China.

After the acquisition, promoting Austin, MG, and Land Rover vehicles in these markets wouldn't actually be a major challenge. (End of Chapter)