China has emerged in recent times as one of the world’s key economic players, attracting western companies to its fast-growing domestic market.

Amongst their number is Terex, now well-established in the market across a range of sectors. The company was present at the recent BICES exhibition in Beijing, where Cranes Today spoke to Ken Lousberg — recently appointed president of Terex’s global cranes business — and Norbert Dudek, general manager of Terex Cranes China, both of whom have been based in the country for several years.

China’s evolution from a developing market to an emerging economic power has seen Terex’s premium products become more and more viable an option for local customers.

"When I got to China six years ago, the approach was always ‘what’s the initial price?’ for the product — that was the main factor," says Lousberg. "Now, and I think this is the case with any economy or country’s business culture, that as it matures, price remains one element, but reliability becomes an element, safety becomes more important, and resale value is much more important.

"Certainly that helps us as that’s what we focus on globally — providing the best overall value, not necessarily the cheapest price. We’re seeing that in all of our businesses, and certainly in Cranes."

Dudek adds: "I’ve seen that this is definitely the trend over the last eight years, fuelled also by the fact that more and more Chinese companies do business overseas.

When they take their equipment overseas they all of a sudden need to work in an environment which is very different to China, and the value proposition comes more into play."

"It makes perfect business sense," says Lousberg. "But you can also understand that when you’re first starting out, price is very important because you don’t know if your company is going to live one or three or 10 or 20 years. But as you get more mature then the investment mentality rather than the price mentality makes sense. Economically it’s quite clear that we’re very competitive."

Dudek identifies the pattern of how pricing in an industry sector can develop: "I’ve seen this in the mining industry, for example, with large trucks, and the crane sector at one point was the same — in the early days of the industry, 80% of that equipment was imported in China because there were no manufacturers locally for certain sizes of product. So that kept the pricing at quite a high level. The moment you have local manufacturers the price drops, and then it increases again a little bit because requirements such as life cycle and safety become important."

Safety focus
As safety becomes more of a priority in the construction sector in China, so the safety features offered by Terex’s product portfolio become more attractive to local customers.

"Safety is at its infancy in China, but it’s becoming important," says Lousberg. "It comes on industry by industry, beginning with the petrochemical industry, nuclear industry — we’re all very dependent on safety as all these nuclear reactors get added here, and the Chinese government know that, so are prioritising it. It’s right in line with what you’ve seen happen in North America and Europe in the early 1900s, and what happened in Brazil 20 years ago — to me it’s really encouraging, and particularly if you’re a citizen of China. The reality is that we all want to go to work and we all want to come home to our families, in better shape than when we left, hopefully. So it’s important to the society and to the government.

"Whilst the priority begins with the industries which could cause terrible harm to society, such as nuclear, it’s also focused on where the most people get hurt or injured or killed. Early on in China, that was in the mining sector, where there’s been a very intense focus from the Chinese government — if you look at what the government’s done over the last ten years in the mining safety sector it’s pretty impressive. And now we’re finding that construction site deaths are becoming the priority because the numbers are quite high. That fits in very well with our expertise regarding crane safety and aerial work platform safety — so we’re very excited, and excited for the people of China."

Bigger aspirations
Whilst there are numerous domestic suppliers of smaller cranes — and particularly truck cranes — in the Chinese market, Terex has less competition in the larger-capacity crane sector.

"China definitely has an appetite for big, high-tech cranes," says Lousberg. "It hasn’t always been the case, but currently the projects in China are big.

"For us, we really focus on the large projects and the large cranes in China. We have more CC 8800-1 Twins in China than in any other country. We’re seeing that with the government investing in infrastructure again and investing in nuclear power, we’re seeing our large crane business coming back."

"There are basically three drivers right now from a project point of view," says Dudek. "For nuclear power plants, there is a five-year plan, and project after project is coming up. Large construction is a big one — not just the new Beijing airport, but if you go around the country you see that larger cities are investing in airports and infrastructure. The high-speed rail is very impressive. So there are a lot of these projects going on. And there is a big requirement for offshore engineering for oil and gas projects — we have this year supplied one of our CC 6800 cranes to the sector.

"The public investment from the government makes sense," says Lousberg. "If you think of the Chinese economy slowing down as it has done recently, any government who does a good job would want to stimulate their economy, and China’s no different. I think China’s actually maybe been more effective than some of the places I’ve lived. So when the economy started slowing down, that’s when the nuclear projects, airports, transportation projects starting coming up."

Meanwhile, the truck crane market has declined in recent years, says Lousberg: "Specifically in cranes, our domestic competitors are still feeling the pain of the slowdown. The truck crane market in China each year has been down 25-40% and hasn’t really started recovering yet. When people talk about the crane industry down pretty significantly in the last few years, the lion’s share of that is truck cranes, and our JV [with Sinomach — see box story] is no different. It’s been impacted pretty significantly by the downturn. But we would hope that the business will do well, as we have invested from an R&D standpoint.

"The capacity invested in truck cranes by the local manufacturers is high, and it’ll take a lot for that to shake out. Some of our competitors made massive investments in truck crane production. So it’ll be tough for some of those to get a return on investment for some time."

Attitudes towards truck cranes in China are often different to attitudes towards larger cranes, says Lousberg, which goes against his own perspective: "For me, the value proposition would be the same whether you’re buying a 20t truck crane or a 500t all terrain.

Financially, the investment works out the same way. But I do think truck cranes are treated like a shovel in China — they’re perceived as not needing to be as reliable, because if a 20t truck crane breaks down, you just walk out to the corner and get another one. If an AC 500 breaks down, the whole job site stops. So there’s a different local mentality around how reliable it needs to be."

Business approach
Doing business in China is, in terms of the main issues to address, very similar to doing business elsewhere in the world — and this fits with Terex’s global approach, says Lousberg: "The Terex culture is the same culture globally. We have global values, we have global purposes, but I think what we’ve done quite well in China is that we’re both a global company and a local company — having a very close connection and relationship with our customers, with the government, is what I think we’ve done well.

"Basic human needs are the same all around the world, but how you get things done and how you show respect may be very different than in the US and in Europe. So we try to take our global Terex approach and apply it here, but we also adapt it to fit the Chinese culture in a local way."

Commitment to the market is also important, says Dudek: "When you sit in front of a customer, their first question if you’re a new company in the region is always: ‘How long are you going to be here? Are you going to be one of those who leave after two years?’. It’s very important to them — they want stability, and to see a company is willing to invest and to stay the course. I think over the last five or six years we have made some great inroads and investments here, really assuring the customer base across all of our business that we are here, we are investing, and we are part of the business."

"It is an investment," agrees Lousberg. "Frankly I love when our competitors come into a new market and think they can be very successful in a year or two, because I know they’re in trouble. It’s either an investment for the long-term, or you don’t do it."

Another aspect of doing business in China is setting up a logistical network to serve customers across what is the world’s third-largest country by area.

"We have a similar approach to how we do it in Europe and the US," says Lousberg. "We would typically have a central service and after-sales centre — our is in Shanghai, with a regional centre in Singapore. These are accompanied by our depots — we have 20 service offices across the country."

"That’s the interesting thing I think," says Dudek. "From a service support point of view, it doesn’t matter where you are in the world, it’s pretty much the same. You need to be global, you need to be established. Importing everything over the long run is not the answer."

The country’s rapidly-developing infrastructure is also helping, says Lousberg: "China is adding airports at a much higher rate than any other country in the world, as far as I know. In the US we have our parts depot which shares the same airport as Fedex, so we can get parts to virtually any part of the US within 8-12 hours. We’re not to that level in China yet, but this country is changing very fast."

Changing roles
When Cranes Today met with Ken Lousberg, he was one month into his new role of president of Terex Cranes.

"I’ve been in the crane group for Terex since the beginning of 2005 and I don’t feel like I ever left. I did come to China in 2010 but we have a significant crane business here.

So there are not so many major changes for me in the new role, other than a global responsibility rather than a regional responsibility.

"What do I want to do with the crane team? I think they’ve had a very solid strategy focused around our customers, and I don’t see that changing. Having lived in China for five years, I have a bias towards doing things faster, and that’s what I hope to bring to the crane team — an intense focus on our customers, and an intense focus on serving them quickly."

For 2016, a key will be to closely monitor a relatively unstable global market, says Lousberg: "The world is in a very complex situation. The price of oil has changed a lot, particularly in the US, which also impacts the Middle East. There’s always something happening in the world today that makes people question their confidence, and I think we’re feeling that today globally.

Certainly we have markets that are doing much better than others — Europe is strong, North America is doing okay but has slowed down with the oil prices, and Asia continues to be quite strong for us. So there’s not one answer for the globe today.

"It really comes down to doing what we know we need to do, and doing it well. One thing is never going to change, and that’s that we need to serve our customers, we have to exceed their expectations, we have to anticipate what their needs will be and be innovative in providing that quicker than our competition — so the basics never change. More of what changes is the investment mentality or the appetite for investment, as things change.

"To me, when markets slow down, that gives us the opportunity to invest more in new product development — it’s counter-cyclical. So we’ll continue to do the basics right, do them better than our competition, and get as much market share as we can."