HefeiFAWServiceStationINTERVIEWDATE:March16th,2000INTERVIEWERNAME:AnneWangIntervieweeNameMr.ZhenShen-faPositionDirectorCompanyandAddressHefeiFAWServiceStationNo.159WangjiangWestRd,Hefei230022Telephone/Fax(0551)5137324BackgroundKeyIssuesConclusionsBackgroundHefeiServiceStationisestablishedin1982.ItsparentcompanyisAnhuiAutoRepairFactory.CurrentlyHefeiServiceStationhas87workers.In1999,HefeiServiceStation'stotalincomeisaround20MillionRMB,withagrossmarginof3MillionRMB.WarrantyService:30,000RMB/monthOut-of-warrantyService:30,000RMB/monthSparePartsSales:8MillionRMB/yearTruckSales:10MillionRMB/year178FAWmedium-heavytrucksaresoldin1999.Totalinventoryvalueis3MillionRMBwith2400-2500SKU.Turnoverperiodisaround4months.1MillionRMB-worthinventoriesareconsideredasobsolescence.Mr.Zhenhopestogetridofthosepartsbycoordinatingwithpartscentresorselltheminlowerprice.1/3ofpartsissourcedfromShanghaiPartsCentre.40%ofpartsaresourcedfromChangchunFuAo.OthersaresourcedfromFAWsuppliersdirectly.HefeiServiceStationisabletopriceitspartsat25-30%higherthanitspurchaseprice,asthestationhasiscredibilityinlocalmarket.KeyIssuesPricefromFAWpartscentreis10-15%higherthanthatofsuppliersandserviceattitudeofpartscentreisnotgood.Thepartscentredoesnotgetbackpartswithqualityproblems.Locationofpartscentreistoofaraway.Itusuallywilltake3daystogettoShanghai.Onlylargepurchasewithavaluehigherthan200,000RMBwillmakeprofit.1HefeiServiceStationoccasionallyfoundthat,partsfromthecentrealsohasqualityproblems.Someofthepartsarealsosourcedfromgreychannel.HefeiServiceStationhopestogetbackthewarrantyfeeinformsoftrucks.Currentlytheservicechargeissettledinformsofparts.HefeiServiceStationisveryinterestedintrucksalesbusinessandhopesFAWcangivethestationmorepolicies,i.e.,moreturnovertrucks,ormorewelcomedtrucktypes.Supplyoftechnicalinformationisnotontimeandcauseddifficultytotechnicians.Mr.ZhenwishFAWcouldprovidethepartscatalogueandsomesparepartsforeachnewtypeoftruckstothem.TherewillbeanewservicestationinHefeiandMr.Zhendoesn'tthinkitrational,asthestandardserviceradiumshouldbe50km,butthenewservicestationisonly10kmaway.HefeiServiceStationdonatesalmost1MillionRMBtoitsparentcompanylastyear,andhavealmostnonetprofitleft.Mr.Zhenhopestorestructuretheservicestationbutfacesresistancefromtheparentcompany.Mr.ZhenthinksFAWshouldprovidesomeassistancetothem.ConclusionHefeiServiceStationoperatesitspartsandtruckssalesbusinessquitewellandgetsagrossmarginof3MillionRMBin1999.MainproblemisthatHefeiServiceStationneedstodonatealmost1MillionRMBeachyeartoitsparentcompany,andleaveitselfalmostnoprofit.2