Article
Challenges ahead
The Wuxi government, which persuaded and helped Shi to return China and set up this multi-billion dollar enterprise in 2001, lent a helping hand to Suntech yet again, this time, by extending an additional 600-million-dollar credit line during the last quarter of 2008.
A: How does Suntech survive between now and the future when things start picking up again? You did get some loans from the government, how long can the government stay involved to help keep the company going?
S: First of all, I think Suntech as a company; we have to prepare for the worst case. What we did so far, we stopped all unnecessary spending. Like expansion program, and some like longer-term activities. So we basically try to reserve our cash as much as possible. Like in last quarter, our cash in the cash position was still over 500 million US dollars. So we have over 2 billion credit line from local banks. So financially, we are still very strong. And on the other hand, in house, we have to enhance our internal operation efficiency, to optimize the team. So that’s very important, which we didn’t have much time to do it, including internal training, and so on. In the end, this is the energy industry. Cost is the key.
A: Like everybody else, you have 4th quarter losses, layoffs and you’ve talked about how this industry is growing. What do you do when things start picking back up again? Are you going to restart rehiring people? Do you scramble to get those contracts met? What are your future plans?
S: We lay off about 800 people --- about 10% of our total employees. So this is actually we do it every year, like the bottom 10% poor performance, we lay them off every year. So actually now, we are still hiring people. We continue hiring people to train them, just like we had a plan to hire maybe around 2500 people at one goal, prepare for further expansion of production capacity, but now because of the economic invisibility. So now, we sort of slowing down hiring, but we are still in the process of hiring and training people.
A: So why do you lay the people off each year?
S: Poor performance, because we do annual performance assessment. So if there’s poor performance, bottom 10%, we lay them off. Actually we did every year in the last 8 years. But before, nobody talked about. Last year was financial crisis, and then it became a big issue.
A: So what percentage of lay-offs do you think were because of poor performance, what percentage was because of the economic downturn?
S: It’s purely poor performance. Because we are 8000 people, lay off 800 people is not a big deal, basically. It is not going to help you with financial situation. It’s mainly performance related.
A: You sound very optimistic, but I do have to ask because some analysts have said, after the stock fell in Q4, the“B”word came out, and people have mentioned bankruptcy for your company. Is that not a possibility?
S: I don’t think so. I don’t know, there’re so many rumors around in the street, some rumors, I sometimes ask myself, why these people full of imagination?
A: You think there’s just too much pessimism out there right now?
S: I think so, I think financial market sometimes, and we can’t loose sight of the prosperity of the industry. If you look at every country, every government, because many people question me, because this economic downturn, maybe this country already has subsidy, maybe government will cancel, but country do that, no any country cancel the subsidy program. Instead, more and more governments initiate these subsidy programs, including Japan.
A: Do you anticipate having more help from the government? The Chinese government and Wuxi specifically, because I know that they have helped you out at least when you began.
S: The government has been very supportive to the company. And I think more excitingly now, we see government start to support the market. That’s actually what we really want. From a company’s point of view, government support is always help. But what we really lack in China is market. If from central government, local government, and provincial government, they start to provide subsidy program for this industry; that is the biggest help.
A: You started off as being the giant in this industry all over the globe. And now you are getting more competitors, how is that affecting how you do business?
S: Of course, it has always been competitive. And we have to be more competitive, I keep telling people, we were pioneer, it doesn’t mean we will stay in that way. We have to sharpen our sword everyday. But I do believe Suntech does have a lot of advantage that many other companies don’t. Especially we have a lot of technique expertise, we understand the industry very thoroughly from every direction. And we establish our position in the industry, our branding name and our technology leadership and so on. This will actually help Suntech to continue to grow very fast, to outperform our competitors.
A: Let’s talk a little about your biggest client, who your smallest client is and where China is going to fall in that eventually the next couple of years?
S: At this moment, our best market for Suntech is still Germany. 80% of product was sold to Europe last year. And we believe our position in the US will be improved. At this moment, First Solar, Suntech, Sun Power are 3 very recognized brands in US market. So actually China is the only foreign company in this country. And also Japan, I believe Suntech is only non-Japanese company actually can sell products in Japan, because 2 years ago, we purchased a Japanese company. So this year we expect we can have 10% of Japanese market. And also even in Abu Dhabi, they want to build a solar city, so among world top, over 50 competitors, they chose Suntech’s product for their first phase project. And in Europe, we were No. 1 supply in Spain; that means we have a biggest market share. We were at least No. 2 in Germany, and in South Korea and many other countries. Of course China, we are really excited about a recent announcement in last week by Minister of Finance, to provide subsidy for solar roof program, about 20 RMB per watt. So we are really excited about this new announcement. We believe China is almost ready to start photovoltaic in this country. I would say in 3 years time, China could be one of the biggest markets in the world.