Three suspensions of production led to Xinfei Electric's defection: foreign investment led to the entry of wolves

On the penultimate day of October, a board meeting was held in the office building of Xinfei Electric Appliances in Xinxiang City, Henan Province.

In the end, the board of directors decided to "reorganize" the company, seal up the files, sort out the finances, appoint Wu Zhishan as the chief restructuring officer, and most of the other management left Xinxiang after the meeting.

The next day, the middle and senior management of Xinfei Electric received an email with the decision of the previous day. The "Notice" in Chinese and English stated that "due to the pressure of the capital chain, the company will stop production activities."

On November 1, the Xinfei Electric Factory was empty, and the warehouses and workshops were sealed. Xinfei’s public account updates also stopped at the beginning of winter in 2017.

The first shutdown keyword was "strike"

The complete shutdown in early November this year was the third in the history of Xinfei Electric, the earliest of which can be traced back to 2012. The difference from this time is that the shutdown in 2012 should be considered a strike.

In the fall of 2012, thousands of Xinfei employees dressed in blue work clothes enlarged the photo of the late Xinfei Electric Chairman Liu Bingyin dozens of times and placed it in front of the headquarters. The area around the photo was decorated like a mourning hall.

Thousands of employees blocked the factory gate and shouted in unison, "Raise wages to survive." In sharp contrast, ten years ago, wearing Xinfei factory uniforms to buy vegetables would cost 20 cents more than the average person.

More than 30 years ago, the Henan Xinxiang Radio Equipment Factory was a small local military-industrial enterprise. However, due to reasons such as single product and aging equipment, the company suffered a loss of more than 700,000 yuan, which was a considerable sum at the time.

According to recollections of old employees, some offices were so poor that they couldn't even afford ballpoint pens, and the entire enterprise was on the brink of collapse.

Liu Bingyin, who was appointed as the director of Henan Xinxiang Radio Equipment Factory in 1983, found that every household in the southern region began to buy refrigerators. Liu Bingyin saw the development prospects of white household appliances and chose to survive in adversity.

Under the leadership of Liu Bingyin, the refrigerator project was officially approved by the Ministry of Light Industry in 1984; in 1985, modern refrigerators were introduced from Philips of the Netherlands; in 1986, a refrigerator production line with an annual production capacity of 100,000 units was put into production, and the "Xinxiang-Philips" brand refrigerators were officially put into sale, which is also the origin of the Xinfei brand name.

Subsequently, Xinfei Refrigerator entered a period of rapid development. An old Xinfei employee said in an interview with China Business News that some users even blocked the factory gate to demand to buy refrigerators, and in the end even bought the refrigerator coupons that Liu Bingyin used to distribute to employees as welfare.

Public company data shows that since 1996, Xinfei Refrigerator has produced and sold more than one million refrigerators for eight consecutive years; in 1997, the brand value of Xinfei reached 3.184 billion; it was among the top ten most valuable brands in China announced by the China Quality Tour; in 1999, the "Xinfei" trademark was recognized as a "well-known Chinese trademark" by the State Administration for Industry and Commerce; in 2001, Xinfei refrigerators were recognized as the first batch of national inspection-exempt products by the State Administration for Quality and Technical Supervision; in 2002, the total production and sales volume of Xinfei refrigerators ranked among the top two in the industry, with a domestic market share of 18.88%.

In 1996, the average monthly salary of Xinxiang residents was only 200-300 yuan, while the average salary of Xinfei Electric Appliances employees exceeded 1,000 yuan. Xinfei employees who had to pay more for food cursed but felt very comfortable.

However, in the following decade, wages did not increase. By 2012, the wages of frontline workers were still around 1,000 yuan. An old employee with more than 30 years of service said in an interview with the media at the time that his salary was much higher than his wife's more than ten years ago, but now it is not as high as his wife's.

The employee said that in 2012 he would go to the street to set up stalls after get off work every day, and Laodong Road in the center of Xinxiang City became the "second workplace" for Xinfei employees.

As the number of players in the refrigerator industry continues to increase and competition becomes increasingly fierce, many home appliance manufacturers are attracting customers by continuously lowering prices; at the same time, global raw materials are rising, and the cost of the refrigerator manufacturing industry is constantly increasing, ultimately resulting in smaller and smaller profit margins in the home appliance industry.

However, within the company, the Singapore-based Hong Leong Group, which was originally intended to expand overseas markets, turned out to be inviting a wolf into the house.

The second shutdown keyword is "indefinite leave"

In 1994, the Henan Provincial Party Committee and the Provincial Government drew on the experience of coastal areas and formulated the strategy of "introducing foreign capital to graft and transform large and medium-sized state-owned enterprises."

Against this background, Xinfei Group, Singapore's Hong Leong Group and Singapore's Yuxin Electric formed a joint venture to establish Henan Xinfei Electric Co., Ltd., in which Xinfei Group holds a 49% stake and the latter two hold 45% and 6% respectively.

In 2005, the Xinxiang Municipal Government transferred the 39% state-owned equity held by Xinfei Group in the joint venture Xinfei Electric to Singapore's Hong Leong. Since then, Xinfeng Electric, which was 90% owned by Hong Leong, has also changed from a state-owned enterprise to a foreign-funded enterprise. This was also the beginning of Xinfei's decline.

After the Singaporean shareholders increased their holdings, the former decision-makers of Xinfei only had the right to participate in decision-making, and conflicts between the capital and management began to emerge. First, Li Gen, the successor designated by Liu Bingyin, was forced to resign, and Zhang Donggui from Hong Leong took over. Then in December 2010, Zhang Donggui failed to manage the company well, and was replaced by Gao Jialin, who was also from Singapore. Less than a year later, Hong Leong director Ruan Jianping replaced the chairman of Xinfei Electric.

Every time the top leader of Xinfei is replaced, it will cause a shake-up in the middle and senior management of the system. After Zhang Donggui stepped down at the end of 2010, Wang Jianhua, then senior general manager of Xinfei Refrigerator, Liang Shangyong, general manager of Xinfei Refrigerator Sales and technical center, and Ding Jun, chief operating officer and legal representative, all left within a year.

However, each management team represented different business strategies. Zhang Donggui advocated international reforms to change the rigid system and inefficient management of Xinfei, which was a state-owned enterprise. Later, Ruan Jianping changed the company's logo and English name several times and increased investment in marketing in the hope of improving the brand image.

Management turmoil caused Xinfei to miss a good opportunity for development. During the new millennium, when refrigerators in first- and second-tier cities gradually became saturated, Haier, Midea and other companies continued to stimulate consumption through high-end transformation. Xinfei, which originally focused on third-tier and lower cities, was at a disadvantage.

After 2008, in response to the global financial crisis, the government issued a policy of sending home appliances to the countryside, but Xinfei was slow to start its high-end transformation, and lost its advantage in the third- and fourth-tier cities and rural towns.

According to the data from China Market Research Group, in 2011, Xinfei's market share had fallen from the second place in the industry to the top five domestic brands. According to data from Ovid, Xinfei's refrigerator sales fell by 37% year-on-year in 2012, and its market share began to decline year after year, and it fell out of the top ten in 2014.

Due to poor management of the company, employee benefits could not keep up with the national economic development, resulting in a large number of talent loss. The remaining employees launched the first strike and production stoppage in 2012.

Although the suspension of production ended with the compromise of Singapore's Hong Leong under the mediation of the Xinxiang Municipal Government, Xinfei employees were promised two salary increases in 2012 and 2013, and Hong Leong re-invited Li Gen to take over the position of general manager in 2013.

However, all the above actions could not prevent Xinfei from going off track. Just over half a year later, the second production suspension storm broke out.

In May 2011, Xinfei Electric invested RMB 200 million to expand its refrigerator production capacity. Based on the market forecast for the next five years, Xinfei increased its total refrigerator production capacity to more than 10 million units per year. However, the end of the subsidy policy for home appliances going to the countryside on January 31, 2013 became the last straw that broke the camel's back for Xinfei.

At that time, some media reported that Xinfei had completely stopped production since May 27, 2013. During the suspension period, regular employees received training in the factory, while all contract workers (temporary workers) went home for vacation.

An insider revealed to the outside world that this "forced leave" was very sudden. "As soon as we got to work this morning, we were notified to hold a meeting for all management above the section chief level. After the meeting ended at 10 o'clock, the company's decision was announced to us, requiring all of us temporary workers to hand in our certificates, tools and all other work-related items and go home for leave."

On May 29, Xinfei Electric issued a response saying that the news of suspension of production was untrue, but admitted that it would adjust its strategy and scientifically deploy the implementation of the work in the face of changes in home appliance subsidy policies.

However, during a subsequent factory visit by Henan Business Daily, it was discovered that only two of the five production lines at the Xinfei headquarters were still in operation, and most of those who maintained the factory operations were regular employees. Contract workers, who numbered more than half of the company, were mostly "sent back." Excessive inventory was the main reason for the reduction of production lines and institutional downsizing.

The third suspension of production key words: "selling the main business brand"

It is worth noting that this time, Xinfei Electric chose to voluntarily stop production, not directly adopting the method of bankruptcy liquidation, but to look for new buyers for the Xinfei refrigerator brand.

A restructuring statement jointly issued by Henan Xinfei Electric Co., Ltd., Henan Xinfei Refrigeration Appliance Co., Ltd., and Henan Xinfei Home Appliance Co., Ltd. circulated on the Internet stated that "Xinfei is ready to obtain legal protection by entering into restructuring, so that the company can enter a relatively safe operating environment and focus on the strategic design of the company's regeneration. Xinfei has launched a working group, which will supervise the restructuring work according to the supervisor appointed by the court, and will convert relevant assets into cash."

However, Xinfei is no longer the golden brand it was many years ago, which is related to its chaotic brand authorization.

After the main business encountered difficulties, Xinfei chose to expand its small home appliance business to maintain profits. However, it did not operate the business itself, but chose to lease the brand to others and authorize OEM.

Although the management of Xinfei Group proposed to "protect the Xinfei trademark" and started to register the Xinfei brand in 2006, the results were minimal, and the most recent brand mistake occurred in March this year.

The National Small Home Appliances Fair was held in Zhongshan City, Guangdong Province on March 5 this year. However, in the list of participating companies, there were three companies with different names, all of which represented Henan Xinfei Company and brought their respective products of the same category to the exhibition. The reason behind this is that Xinfei sold the trademark rights of the same category to multiple companies at the same time.

Not only that, the lack of a strict and effective supervision mechanism has led to uneven quality of OEM products, and small household appliances have become frequent visitors to the quality blacklist.

The history of Xinfei's small household appliances being blacklisted in the past three years The history of Xinfei's small household appliances being blacklisted in the past three years

Two reasons led to the rapid depreciation of the overall value of Xinfei Electric. Industrial economist Hong Shibin believes that under such circumstances, the acquisition of Xinfei Electric is more likely to use it as a manufacturing base or logistics center.

Now that even the refrigerator brand it started with is being sold, how will Xinfei restructure and transform? Faced with this question, the person in charge of Xinfei simply used the reason that "the government is investigating and it is inconvenient to disclose" and hurriedly hung up the phone.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.