The company had everything an employee could wish for: A generous pay package, job security, excellent perks and a brand name that made it easy to get girlfriends.
The life at Shenyang Machine Tool Company (SMTCL), the country’s biggest manufacturer of numerical controlled machine tools and machinery equipment, is a bit different now.
The Shenyang-based company in Northeast China’s Liaoning province has gone through many twists and turns: From the first company in the nation to produce machine tool to becoming the number one machine-tool maker by sales in the world by 2011 to drop in sales.
Whereonce SMTCL, just like rest of the Northeast,grew at an astonishing pace, its bottom line took a hit with the development of market economy and China opening itself up to foreign investment and technologies.
A study by Lu Feng, professor at the School of Government, Peking University, said the number of employees dropped from 27,000 to 11,000 without any new workers joining between 1993 and 2002, according to a report carried earlier by China Daily.The labor force now stands at 14,000.
After the central government launched a major push to revitalize the Northeast, SMTC’s sales revenue reached 18 billion yuan ($2.7 billion) in 2011. It topped the global industry in revenue for three straight years.
This fast-paced expansion, however, came at a price. SMTCL, famous for producing precision tools, began making mid- and low-end products that generated little revenue.
It knew it had to chart a new course to maintain its dominant position – and so it got down to work. It carried out massive restructuring in all areas – organizational, operational and technological, brought in experts from abroad, turned focus on innovation and started thinking out of the box.
The world’s first integrated smart machine toolmaker, i5M8, manufactured by the company is a good example of its innovative approach. First launched in 2007, the i5 series broke the dominance of foreign companies and showed that Chinese firms were also capable of producing numerical controlled machine tools.
That was just a first step. In a move that was a complete break from its past practice, SMTCL decided to rent out the tool instead of just selling it. Any firm that wanted to use it could simply rent it. This step proved an ideal match for the country’s entrepreneurship drive, as the company saw 17,000 lease orders by the end of last year.
With this decision, the decades-old company successfully transitioned from manufacturing to becoming a service provider. To complete the cycle, SMTCL then launched its own leasing unit to provide intelligent machine tools for use by other entities.
Only time will tell how successful the company will be in turning around its fortune, but it’s a good start.