pierre e. cohade
President, Asia Pacific Region, GOODYEAR TIRE Management, Shanghai, China
2008-04-01, China International Business (CIB) www.cibmagazine.com.cn
By Mina Choi | From CIB April 2008 Print Edition
FACE TO FACE INTERVIEW
JOB: President Asia Pacific Region, Goodyear Tire Management (Shanghai)
ADDITIONAL POSITIONS: Vice-chairman, International Advisory Council of the Mayor of Xuhui District, Shanghai; Governor, American Chamber of Commerce in Shanghai
EDUCATION: CERAM School of Business in Sophia-Antipolis, France; Pennsylvania State University MBA
PAST JOBS: Eastman Kodak, Danone
IN HIS POCKET: LV wallet, LV business card holder, Nokia phone, Blackberry, Dunhill USB keychain, Shanghai Tang pen
Pierre E. Cohade is a Frenchman, but he is a firm believer in Anglo-Saxon business values. He has spent 20 of his 22 working years working for American corporations – 17 at Eastman Kodak, and three and a half at Goodyear Tire, as Asia-Pacific president. That other year and a half was spent at French food-and-beverage company Danone, a now-notorious name in China for its disastrous joint-venture with Chinese beverage maker Wahaha. Cohade left Danone before that debacle, but has much to say about why the French business mentality just didn't suit him, and why he believes in Goodyear.
Founded in 1898 by Frank A. Seiberling, Goodyear Tire & Rubber Company is the world's oldest and one of the most iconic tire brands. The company started in Akron, Ohio with just 13 employees and a product line of bicycle and carriage tires. Today, it is one of the leading tire makers in the world, with 60 plants in 26 countries and 70,000 employees worldwide. Last year, it posted record sales of USD 19.6 billion, a 5% increase over 2006.
When Cohade joined Goodyear in 2005, he moved the Asia Pacific headquarters from Akron, Ohio to Shanghai. He says that Goodyear was the first foreign tire company to invest in China, when in 1994 it bought a state-owned plant in Dalian that hadn't been profitable for years. Though it is Goodyear's only factory in China, the company has devoted a great deal of attention to expanding it; Cohade says it is now Goodyear's second-most advanced plant in the world. A Chinese silent partner, Bingshan, owns a 30% minority stake in the plant. China is one of Goodyear's fastest-growing automotive markets; in 2007 the company posted USD 1.7 billion in sales on 19 million units of tires sold here.
When did you first come to China?
My exposure to Asia Pacific started in 1999 when I ran Kodak's consumer business. In the late '90s, Kodak bought most of the state-owned film and X-ray companies in China and made a significant investment in manufacturing and distribution. The first time I came to China in 1995, Kodak had 50 photo-developing stores in China. Ten years later, we had 9,100 stores.
Was that growth surprising?
No. If you find the right solution in China, business can expand very fast. I had not anticipated that it would grow so fast, but when success comes, it comes fast in China. Of course, when failure comes, it comes even faster.
So would you say that you failed fast at Danone?
(Laughs) I cannot comment on that. When I joined Danone, I thought I would love working with the company because I love the brand portfolio; I had grown up with these brands. But I started missing the Anglo-Saxon company culture I was familiar with at Kodak.
What do you mean by that?
There are essentially three differences between a French company and an Anglo-Saxon company. First, Danone operates via a network. By this I mean, 'who do I know, and what network of friends do I have, within the organization?' But an Anglo-Saxon company is based on a hierarchical model where the information goes up and down the chain and decision-making is much more of a process.
Secondly, an Anglo-Saxon organization is much more a process driven organization. Systems have been put in place. There is management discipline, and so a process orientation in decision-making. Danone seems at times to operate by inspiration.
Thirdly, the Anglo-Saxon model is based on results. Results are measured based on data and metrics of success.
I have a lot of respect for Danone. It's a fantastic company, but I will never, ever underestimate the cultural difference between an American classical company and a French classical company. I'm French so I thought I could understand French corporate culture. I was wrong.
News media report that last year, Goodyear's Dalian plant had a USD 140 million expansion and a sharp growth in output (17,000 units a day). This seems like a very fast expansion.
Unfortunately, Goodyear has a very strict policy on data and country-specific information so I cannot comment on that.
What we have managed to build in the Dalian plant is a great manufacturing operation. . . . First, the plant has extremely advanced equipment for making the most advanced tires. Secondly, the associates, by which I mean employees, are the best trained and engaged and effective at using the equipment. Thirdly, we have great manufacturing processes and methodologies, and so we manufacture the best tires in the world in terms of performance and materials. In fact, Goodyear recognized Dalian as its best factory last year.
We have an environmentally clean factory – we have gone 'green.' We have reduced our energy consumption by 20%. We have eliminated waste. Our Dalian plant sends zero waste to the landfill. This is something few tire factories have achieved. The EPA recognized Goodyear as an excellent company and at the September 2007 World Economic Forum in Dalian, Goodyear was recognized as a clean and lean plant.
You said that Goodyear has extremely low employee turnover in a country where staff retention is an ongoing issue. How have you achieved that?
We invest significantly in our associates. We offer training, we implement processes to minimize accidents and injuries, and we invest in safety devices. We offer competitive salaries; we offer continuous training and the opportunity for the associates to operate the most advanced equipment; we offer a safe and clean environment.
[And in Shanghai] the last two years have been amazing. We have been already recognized as the best employer in Shanghai and we've had little problems retaining our employees.
I've found the staff in China extremely motivated. What has surprised me is that for many of the white-collar employees in China, when they come to work in a multinational company, they are looking for several things: one, a respectful and good work environment; two, training and development that will give them some personal growth; and three — this I did not know until I moved to China — ethics. They all tell me that they are looking for ethics. This is a first generation of employees embracing market-based economics and they are looking for values. Where do they find values? Goodyear pays a lot of attention to values.
Currently we have between 9-14% staff turnover, but when people leave us, they leave for two reasons: either because their family situation has changed or because they have received a fantastic promotion that they cannot turn down.
Goodyear also promotes internal networking, especially with women associates. We have the Women in Leadership network at Goodyear and chapters in every country. This is important in Shanghai, where 70% of the staff is women.
Is running the office from Shanghai cheaper than running it from Ohio?
You don't come to Shanghai for cheap labor; you come here for great labor. I would say that compensation costs have gone up sharply over the past few years. For professional employees, there is not much difference between costs in Europe vs. the costs in Shanghai. If you had to hire a talented expert in finance, you are looking at virtually the same costs.
How about wage increases at your Dalian plant?
I would say there has been about a 10% wage increase for our white-collar workforce in Shanghai and a 5-7% wage increase in manufacturing. Of course, that does not include promotional raises, which are different. Despite the wage increase, and the increase in the costs of raw materials, we have been able to reduce costs by using cheaper materials, like substituting oil-based products for corn-based products, and implementing simple strategies like using natural light and windows to reduce energy consumption. When we expanded the plant in Dalian, we invested into advanced, highly automated processes, resulting in low labor content. Consequently, we're not facing the same problems that others who have been competing based on low-cost labor are.
Can you tell us regionally how the tire industry looks from where you are?
Regionally, the automotive industry has expanded extremely fast. The big markets are China, India, Australia, Japan, Korea, and Thailand. China and India are driven by their domestic growth, Thailand by investment in manufacturing plants, and Japan, Korea and Australia are markets that have large, indigenous automotive industries.
News media reports that you expect to export about 30% of the tires made in China.
I'm not sure I can disclose the exact number. Although the RMB appreciation is an issue, as is the reduced VAT rebates for export (which results in an 8% increase in cost), we have not lost market share outside of China.
How about your sales in China?
We cannot disclose our market share, but I can tell you . . . it is increasing. We always want to compete on the quality of the product rather than the price.
There are currently three tiers of market in China: One, the lowest cost tires made by Chinese manufacturers; two, the mid-range tires made by both Chinese and international companies; and three, international market leaders who sell based on quality and performance. Goodyear operates in the latter of the three markets and we're focused on the luxury segment, servicing the cars that cost RMB 150,000 (USD 21,200) and up. So we have a strong relationship with BMW, Audi, Mercedes-Benz, Volkswagen, Buick, Cadillac, Toyota, Ford, Peugeot, and others.
These are business-to-business sales made directly with automotive manufacturers. Can you tell us about direct sales to retail customers?
We are building the largest [retail] network in China, consisting of about 800 Goodyear-branded stores. These are licensees set-up to distribute Goodyear tires. They will get assistance from us, advice on training, and even decorating the store to develop a clean, appealing, professional environment, in exchange for Goodyear getting a minimum share of the business.
What is Goodyear doing to try to limit the damage to the environment caused by the ever increasing number of cars on China's roads?
We have consistently tried to reduce our consumption of finite resources and have moved to source materials from renewable resources. We work closely with other industries to recycle used tires, and to reduce waste and promote recycling on all fronts.
As part of our green strategy, we're developing tires that will give more mileage per car (more grip and less rolling resistance), which also means lower emissions from the tires. For us, it's not whether people should buy a car, but what sort of car should they buy? . . . We have no given right to come and tell China, "Don't do what we've done." A car is the most aspirational object one can have. A car and a telephone mean freedom and they give people a sense of status. It is the aspiration of the growing Chinese middle-class.