FAWChangchunServiceStationINTERVIEWDATE:March14,2000INTERVIEWERNAME:BillHeIntervieweeNameMr.LiuFengming,ManagerCompanyandAddressChangchun,JilinTelephone/Fax0431-5905892BackgroundWesoldlessthan40JieFangtrucksin1999.Theproblemswereworkingcapitalandpersonnel.Honestly,employeesdon’thaveincentivestoworkhard.Wearestillstate-runcompany,notprivatecompany.Weplantochangeitthisyear.Theservicestationhas34employees.Nooneisresponsibleforsalesinmyservicestation.Thereare3peopleintheparentcompanywhoareresponsibleforthetrucksales.TherearemanydisputesabouttheFAWpaidservice(about30%)nowadays.ThereasonisFAWletthecontractorsdecideifthecustomer’sserviceneedsarebecauseofthequalityoftheproductorcarelessuse.OurservicestationalwaysdotheservicefirstandclaimtheexpenseslatertoFAW.FAWthanaskthecontractorstoinvestigatetheproblems.Forobviousreasons,thecontractorstrytoarguetheproblemsarenottheirfaultsanddon’twanttopayfortheservice.Thisisabigheadacheforus.Asaservicestation,wealwayswanttoserveourcustomersbyatimelymanner.However,wehavetodelaytheprocessifthisproblemsustains.OurservicerevenuewasRMB3.7millionin1999(RMB3millioninFAWpaidserviceandRMB700,000incustomerpaidservice).GrossprofitwasRMB1.2millionandnetprofitwasRMB300,000.OurpartssalesrevenuewasRMB7millionin1999.Grossprofitwasonly6%.Wepurchase60%ofthepartsfromFAWNortheastPartsCenter.TheFAWPartsCenterdoesnothaveeverythingweneed.FAWconvertsFAWpaidservicetoparts.ItisOKiftheyhavethepartsweneed.Theproblemis,oftenthannot,theydon’thavethepartsweneed.Wehavetheabilitytobuilda“Four-in-One”dealership.However,itdependsonwhichdirectionthemanagementofourparentcompanywantstogo,serviceorsales?Again,thisisastate-runcompany,notaprivatecompany.Thereasonwecannotbea“Four-in-One”dealerassomeservicestationsinsouthernprovincesare:Location.ThisisChangchunandtherearemanydealersalreadyManagementdecision.Servicefirstorsalesfirst?Incentiveprogram.Thereisnoincentiveprograminplacenowsincethisisstillastate-runcompany.1TheservicestationsinChangchunareawillfaceaverydifficultsituationwhenthedealersinChangchunhavethe“Four-in-One”capability.Nowthedealersarehelpingtheservicebusinessindirectly.ThemoretrucksdealerssellinChangchun,themoreservicebusinesstheservicestationscanget.However,inthefuture,thedealerswillhavetheservicefunction.Themajorityofthelocalcustomerswhopurchasethetrucksatthedealerwilldotheserviceatthesameplace.TheserviceneedsofservicestationsinChangchunareawilldecreasesignificantly.ThisscenariohasalreadyhappenedtoAudi’sservicestationinChangchun.WebegantosellFAWbrandsevenyearsago.AtthebeginningweselleverybrandofFAW.WehavebeensellingJieFangtrucksonlysincelate1996.Wesold2755trucksin1999.RevenuewasRMB400million.ProfitwasRMB2.7million.Wesold1758trucksin1998.RevenuewasRMB200million.ProfitwasRMB1.3million.Theperformanceof1999wouldhavebeenbetteriftherehadn’tbeentheWTOdealbetweentheU.S.andChinaandtheHighwayLaw.Therearetoomanydealersnow.Mostofthose“dealers”onlyappearduringpeakseasontofightforthelimitedresource.Youcanneverseethemduringthenon-peakseason.ThecurrentFAWpolicytreatsusandthose“dealers”equally.ItisinfactnotfairtodealerslikeuswhoalwayshelpFAWtoselltrucksregardlesshowdifficultitis.Thequalityofdealersisnotgood.WewouldlikeFAWofferustrainingduringthenon-peakseason.Wecanpayforit.WethinkChangchunonlyneeds5dealers.FAWhastopurifyitsdealerportfolio.IfFAWcanlayoffitsownemployees,itsurecanlayoffunqualifieddealers.ThedealersareobligedtohelpFAWtobuilditsJieFangbrand.AssoonasFAWstandardisesthedistributionchannel,dealerscanaggressivelypenetratethemarketwithFAW’ssupport.ThesalesnumberisonlyoneofthecriteriaFAWshouldusetoevaluatetheperformanceofadealer.FAW’sdealerpolicyhastobestableandsustainable.Frequentchangesofpolicywillhurtdealer’sfeeling.Whenresourceislimited,FAWshouldtreatdealersandmodifyingfactoriesfairly.Dealersalsoneedtheresourcetoservetheircustomers.Alsotheworkingcapitalofthosemodifyingfactoriesshouldbeusedonpurchasingrawmaterial,notinpuretrucktransactions.Weplantobuildthe“Four-in-One”dealershipwithinthisyear.Wehavesubmittedourapplicationtothegovernmentandarewaitingforresponse.Assoonaswegetthepermission,wewillbegintheproject.WeplantoinvestRMB7millioninthisproject.AfterFAWchoosesthe5dealersinChanchun,the5dealersshouldcoordinatewitheachothertosetupabottomlinepricetoavoidthepricewar.Inour2opinion,5dealerscansellthesameamountoftrucksas40oreven100dealers.IfFAWdecidestoseparatesecondtierdealersfromfirsttierdealers.Firsttierdealersshouldbefullyauthorisedtomanagethesecondtierdealers.3