Honeywell puffs up localization
By Jiang Ya (China Business Weekly)
Updated: 2004-09-01 09:48

A US-based leader in manufacturing and diversified technology is expanding into the world's fastest-growing market, and localizing its research and development and sales and marketing divisions.

"Our focus in China is to conduct our business as a Chinese company," said Roger Fradin, president and chief executive officer of Honeywell Automation and Control Solutions.

Honeywell International Inc, traded on the New York Stock Exchange, moved its Asia-Pacific headquarters to Shanghai two years ago.

At that time, the firm said it planned to double its business in China by 2005. That meant the company had to expand its business in China by 25 per cent per year.

"We are on plan to achieve that goal and, again, at the beginning to accomplish our next five-year plan," said John O'Higgins, the firm's president of Automation and Control Solutions for Asia-Pacific.

Honeywell plans to grow its automation and control business in China to US$600 million -- from the current US$200 million -- over the next five years.

"We are confident there are opportunities and possibilities, and right partners, here in China for us to be successful," said O'Higgins.

Honeywell -- one of the 30 stocks that make up the Dow Jones Industrial Average, and a component of the Standard & Poor's 500 Index -- is running a global business worth US$23 billion.

The firm is involved in four core areas -- aerospace, speciality materials, transportation and automation and control solutions.

Last year, Honeywell realized a year-on-year revenue growth of 3.7 per cent in its global business, which translated into a net profit of US$1.3 billion.

The automation and control business, which the firm says makes the world safer, more secure, comfortable and energy-efficient, is worth US$8 billion and accounts for 35 per cent of Honeywell's global business.

The firm, based in Morristown, New Jersey, established a representative office in Beijing in 1983. Its business in Asia-Pacific has since grown to nearly US$2 billion.

China remains one of Honeywell's most active acquisition markets. The company's acquisition team earlier this year purchased two Chinese fire alarm companies. One is based in Shanghai and the other in Xi'an.

Honeywell also acquired the China operations of a multinational company in Shenzhen that produces sensors.

Fradin refused to name the three companies, or to say how much the acquisitions cost.

"I can tell you they are small acquisitions," Fradin told reporters in Beijing last week, during his visit to meet key Chinese clients.

Said O'Higgins: "China is a very fruitful market for our joint ventures, and we are negotiating to establish more."

Honeywell has 23 active subsidiaries and joint ventures in China, worth a combined US$500 million. They include production and maintenance services, trade in aerospace and automation and control systems.

Honeywell is also developing its manufacturing, sales and marketing, and research and development facilities in China.

Last year, the company added more than 100 sales and marketing professionals in China.

Fradin, author of two books on business management and strategies, visited China last week to address the training programmes for Honeywell's sales managers in Asia-Pacific.

The sessions were held in Shanghai.

Honeywell has five research and development (R&D) centres in China. One of the firm's four global technology solutions labs is located in Beijing.

The company's fastest-growing business in China involves industrial automation processes control systems.

"In this area, and in a number of industries, China is really setting the technology trend for the rest of the world. That allows the applications we develop here to be used outside of China," Fradin said.

"We will be building more R&D facilities in our security business, likely in Shenzhen."

The company recently opened an 80,000-square-foot (7,432-square-metre) high-tech manufacturing facility in Xi'an. The facility makes smoke detectors for fire alarm systems.

Said Fradin: "I don't know the specific number of our manufacturing facilities, but we have a substantial number of factories in China."

The technology giant, which helped Sydney construct integrated solutions for the sports venues and upgrade infrastructure -- including the subway and metropolitan rail and airport systems -- for the 2000 Summer Olympics, is not going to miss business opportunities ahead of the 2008 Beijing Olympics.

"We will focus on providing building automation, fire and security services and products for the Beijing Olympics," O'Higgins said.

Last year, Honeywell put in place a special team to work with various investors and the Beijing Organizing Committee for the Games of the 29th Olympiad (BOCOG).

That team has been co-operating with the design teams and the various groups building the infrastructure, including traffic and transportation.

Said O'Higgins: "We will continue to do that in the next couple of years."

One of Honeywell's Chinese partners, based in Tianjin, has been selected to construct the Olympics' soccer stadium. Honeywell's building automation systems and other solutions will be used in the project.

Honeywell is also bidding to be one of BOCOG's partners.

Although there has been no indication of the outcome, Honeywell is confident it will become a trusted partner.

"Our advantage lies in our ability to combine different systems and different local applications. That advantage also applies to the Beijing Olympics," O'Higgins said.

"We have been doing pretty well in terms of localization, and we know China's market very well," Fradin said.

He noted the company has been in China for nearly 70 years.

Honeywell's strong technology support is one source of its confidence.

"Our solutions have successfully stood tests under the most gruelling situations, including the 2000 Sydney Olympic Games," Fradin said.

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