Actuant Invests Heavily in China: Engineering Firm Plans to Open $15 Million Design and Development Center in Shanghai
Posted on: Sunday, 2 March 2008, 03:00 CST
By John Schmid, Milwaukee Journal Sentinel
Mar. 2--Anyone who still argues that China's engineers lack the skill and inventiveness of their Western counterparts hasn't been paying close enough attention, says the chief executive of one of the Milwaukee area's most globally connected companies.
"The Chinese are as good as anyone in the world," said Bob Arzbaecher, CEO of Actuant Corp., a $1.5 billion-a-year industrial engineering company that operates in more than 30 countries.
Actuant is preparing to open its single biggest design and development center, which will serve its entire span of subsidiaries. But it won't be in Wisconsin.
When it opens this summer near Shanghai, China, the new $15 million global engineering campus will start with 75 researchers and engineers, about four times the number at Actuant's current biggest engineering center in Columbus, outside Madison.
Actuant already has major operations in China, having acquired a Chinese engineering firm, the Shanghai Sanxin Hydraulic Co., in 2003.
Sanxin was called in for the crowning touch on the main stadium for the 2008 Beijing Olympic Games, nicknamed the "bird's nest" after its radically different look.
It took shape over a two-year period while suspended on stilts, as welders interwove a latticework of steel into a single ribbed structure that rises 226 feet and consists of 22 miles of steel "twigs."
Actuant China Ltd., which absorbed the Sanxin crew, used synchronized hydraulic jacks and satellite controls to lift the 45,000-ton nest off the 78 stanchions that held it aloft during assembly. Without wobbles that would weaken the welds, it then lowered the structure onto its foundations so crews could start adding the 80,000 seats.
The bird's nest was not the only grand-scale Actuant job that garnered attention in China.
In 2003, Chinese newscasters gave nightly updates as Actuant's crews and machinery lifted and moved the Shanghai Concert Hall, one of the few historic buildings to survive Shanghai's dizzying transformation into one of the world's largest cities.
It took 12 days to move the building the length of more than two football fields to clear the way for a subway line. But it took months of advance work, because the acoustically renowned hall was built in the 1920s and is festooned with pillars, marble and Baroque opulence. Its fragility dictated that Actuant's hydraulics operate with accuracy to 0.2 millimeters.
Actuant also built the mechanics of a retractable roof on the giant soccer stadium in Nantong, a point of pride for a company whose headquarters in Butler lies a few miles from Miller Park and its famously glitchy roof, built by Mitsubishi Heavy Industries of America. Arching over the Nantong stadium are two semi-spherical steel-and-glass shells, each spanning 65 yards and weighing 1,100 tons.
"I find it hard to make the argument that it's a matter of inferior quality, or we'd never get those things off the ground," Arzbaecher said of his company's Chinese engineers.
The CEO said he dismisses criticisms of Chinese engineering quality as a form of protectionism.
China and India today produce staggering numbers of engineers in disciplines that drive innovation, such as electronics, bioscience, physics and mechanics. They have advanced China beyond commodity manufacturing and India beyond call centers. Milwaukee, by contrast, only recently has begun to reinvest in its engineering universities.
Measured in four-year degrees awarded in engineering and computer science, Duke University found that China outgraduated the U.S. by 361,270 to 137,437 in 2004, the last year of reliable data. India overtook the U.S. about the same time.
In the innovation wars, India has an advantage because so many of its graduates speak English. China, mindful of the gap, mandated nationwide English instruction in its grade schools seven years ago.
Some experts say the sheer number of Chinese engineers is deceiving. The McKinsey Global Institute, a research arm of the McKinsey & Co. consultancy, estimates that nine out of 10 of China's 1.6 million young engineers lack skills needed for global competition.
The blunt-spoken Arzbaecher disagrees.
"It's more like 50-50," he said.
Plenty of other companies also are opening or expanding R&D centers in China, including General Electric Co., General Motors Corp. and Milwaukee-based Rockwell Automation Inc.
"China now ranks as the most attractive destination for new offshore R&D facilities," according to a report by the Council on Competitiveness, a nonprofit think tank in Washington, D.C. China has increased national spending on R&D at an annualized rate of nearly 20% over the past 10 years, it found.
Eight years ago, Actuant had little more than a small sales office in China. Today, it has nearly 500 Chinese staff, including manufacturing sites.
In the fiscal year that ended in August, Actuant's sales in mainland China were $35 million. Arzbaecher projects they will rise to $80 million by 2010.
Actuant's approach to China shifted after the company in 2000 hired Raymond Shaw, a Chinese-born engineering professor who had moved to New York and worked as a bus driver following the Tiananmen Square protests of 1989.
Brought in as the architect of Actuant's China strategy, Shaw recognized by 2002 that Actuant already had several R&D centers in the United States and two in Europe. By adding China, the company could create product-development teams that could work around the clock, dividing the workday into three time zones. The idea is to orchestrate the full breadth of the company's global engineering staff of 450.
"That is the beauty of globalization," Shaw told Actuant's managers. Not only would Actuant triple the pace of technology development -- at least in theory -- "but you also use global talent," Shaw said.
Actuant more than doubled its R&D budget in the last four years to 2.5% of its total sales. It boasts more than 775 patents.
Shaw, who also taught at an engineering university in Shanghai, said he embraced the young Chinese graduates that McKinsey dismissed. They are trainable, work hard and are inexpensive, he said.
Not everything has been smooth for Actuant. Tuthill Corp., a globally active manufacturer, hired Shaw away from Actuant last year. And one of Actuant's first efforts at 24-hour product development, creating a new industrial air pump, took a year longer than expected because of confusion among suppliers and kinks in communication.
Arzbaecher remains undeterred.
"The strategic need for 24/7 engineering talent to support any of our initiatives," he said, "whether it's for an air pump or retractable roofs, is critical to our success."
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Source: The Milwaukee Journal Sentinel
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