From November 14 to November 16, 2017, on the Enlarged Session of 3rd General Council of 9th China Rubber Industry Association and 18th National Rubber Industry Information Conference, Zhang Hongmin, chairman of Shandong Rubber Industry Association, introduced the progress conditions of merger and reorganization of Shandong tire industry and talked about his own understanding and opinions.
The government advocates merger and reorganization of the enterprises
“Like the national situation, in the first three quarters of 2017, the output and export volume and value of Shandong tire industry all increased to some extent.” Zhang Hongmin said, the listed companies and leading enterprises played a major role in it. However, some enterprises shut down and closed down due to problems such as low technical level, poor innovation capacity, slow transformation and upgrading and rupture of capital chain. In 2017, some enterprises vitalized the enterprise assets through merger and reorganization and recovered the production through evening up.
According to the statistics of Shandong Rubber Industry Association, in the first three quarters, the completed tire output of Shandong Province was 360 million units, with a growth (year-on-year, same below) of 5.06%, accounting for 48.1% of the total national output; in which, the output of radial tires was 300 million units, with a growth of 5.65%, accounting for 53.41% of the total national output. Shandong is worthy of the title of No. 1 tire province in China. Its export delivery volume was 170 million units, with a growth of 1.8%; and its export deliver value was 41.97 Billion Yuan, with a growth of 13.2%.
Zhang Hongmin introduced that early from the second half of 2011, the government of Shandong Province required the tire industry to carry out merger and reorganization. He thought that although there were a lot of tire manufacturers in Shandong Province, there were a few enterprises with large influences at home and abroad, thus it was necessary to promote the merger and reorganization of the tire industry in the province, boost the superior enterprises to be bigger and stronger and further improve the awareness and market share of Shandong tires. According to the requirements of the provincial government, Shandong Economic and Information Technology Committee and Shandong Rubber Industry Association formed an investigation group to head for Dongying, Yantai, Weihai, Qingdao, etc. where key tire enterprises concentrated for investigation and hold talks with key tire enterprises such as Triangle Tire, Linglong, Chengshan Group, Sailun Jinyu, Doublestar Group, and other enterprises such as Hengfeng Tires, Xingyuan Group and Wanda Boto.
“The results of investigation and talks are not satisfactory.” Zhang Hongmin said when describing the conditions then. At that time, the enterprises were in good operation conditions, and large and small enterprises were not interested in merger and reorganization. Large enterprises thought that the equipment conditions and personnel quality of small enterprises could not satisfy their requirements while small enterprises thought their production and operation conditions were not bad and had the mind of “Better be the head of a dog than the tail of a lion”. As thus, the merger and reorganization led by the government was laid aside. “I personally think that the vision of the government is advancing, however, carrying out merger and reorganization led by the government and by administrative means seems to be not mature in that case.”
The market promotes merger and combination of the enterprises
However, along with development of the situations, many enterprises have polarization, the cases of alliance between giants and strong enterprises merging weak enterprises frequently occur. It was the strategic cooperation between Sailun Co., Ltd. and Shandong Jinyu Industrial Co., Ltd. at the earliest, which is a typical case for merger and reorganization in Shandong Province. At that time, the technical advantage and management level of Shandong Jinyu Industrial Co., Ltd. in the aspect of semi-steel radial tire were extremely high within the province, while Sailun was a listed company and possessed capital advantage. The combination of these two enterprises gave play to the advantages of each enterprise and achieved excellent reorganization effect and rapid development. In 2016, Sailun Jinyu Co., Ltd. ranked 2nd in sales revenue in Shandong Province, and had sound momentum of development.
But several enterprises have some problems during the development. Deruibo Tire going bankrupt in 2015 was acquired by Shandong Hengfeng Rubber and Plastics Co., Ltd. with an investment of 860 Million Yuan through efforts of local government. Hengfeng also held Shandong Wosen Rubber Co., Ltd. of Huaqiao Group through capital link, rented the production equipment of production enterprise of all-steel radial tires Shandong Yongjin Rubber Co., Ltd. and merged Dongying Jintai Tire Bladder Co., Ltd. lately. Through the above-mentioned measures, Hengfeng Rubber and Plastics became the largest tire enterprise in Guangrao County, with a daily production of 30,000 units of all-steel radial tires and over 100,000 units of semi-steel radial tires, whose scale is relatively large in China.
After the Spring Festival of 2017, Shengtai Group Xishui Manufacturing Plant stopped production; through the support of the risk investment fund of the government and joint efforts of the enterprise, Shengtai Group was wholly merged into Xingyuan Group. Now the whole Xishui Base goes to operation again, and runs well at present.
Shandong Yongtai Chemical Group was also EOL after the Spring Festival, but has recovered partial production through the rental of Shandong Huasheng Tire Co., Ltd.
O’Green Tire in financial difficulty reached a deep cooperation agreement with Shandong Dahai Group, and its production was preliminarily recovered through funding injection.
Qingdao Guangming Tire Company is the first allsteel manufacturing enterprises in Pingdu City, since its operation status has problems, through re-packaging of the asset company Yiyuan Investment, it was held by American Cooper Tires Company in 2016.
At present, some enterprises are still in unstable operation conditions, and are EOL, including Shandong Hengyu Group, Shandong Fulltour Tire Co., Ltd., Leling Vheal Group Co., Ltd. and Shandong Jinshan Automobile Parts Co., Ltd., who are looking for partner at present.
Even some enterprises still surviving now are still in the difficult position of difficult capital turnover, production and operation and declining economic benefits.
Only by reorganization and transformation can the enterprises enter benign development
“During the operation process of Shandong Province tire industry, these problems are normal.” Zhang Hongmin expressed that Implementation Plan of Transformation and Upgrading of Shandong Province Tire Industry introduced by the government of Shandong Province in October 2014 required to implement total quantity control, speed up transformation and upgrading and quality and efficiency improvement, eliminate outdated low-end capacity and support the backbone enterprises to be bigger and stronger. Such old pains were necessary, after elimination of partial low-end outdated capacity, the operation of the whole industry would become healthier.
“Given the current situation, bankruptcy reorganization is in progress. After a few years, I believe that there will be a large change.” Zhang Hongmin hoped that through bankruptcy reorganization, Shandong Province could get rid of partial capacity, constantly improve industrial concentration, greet a substantial improvement of the quality of the whole operation and gradually step into the benign track of healthy development.
