Chapter 390 Forced to compromise (please subscribe)

Takamiya looked at the label on the microwave oven with a surprised expression. The words "Made in China" appeared on the Whirlpool microwave oven, completely subverting Takamiya's cognition.

"Am I right? This microwave oven is made in China? Can the Chinese also make a microwave oven?" Takamiya Yuuto said with a look of disbelief.

In the early 1990s, the traditional manufacturing powers of Europe and the United States began to decline. Japanese industrial products had spread all over the world, and Korean manufacturing replaced Japanese products and became synonymous with copycats and low quality.

As for Made in China, what is that?

In the eyes of foreigners, China is probably only capable of producing simple primary products such as clothes and socks, and it also needs to compete with Southeast Asian countries.

It is the norm in China to sell one billion pairs of socks to buy one airplane. Any industrial product with some technical content has nothing to do with being made in China.

Microwave ovens are considered to be products with certain technical content among home appliances. How could they be made in China?

Next to him, Inoue Shigeru explained: "This microwave oven should be made in China. After all, it is a Whirlpool microwave oven. I don't think Whirlpool will deceive American consumers on this matter."

"Can a microwave oven made in China work?" Takamiya still looked doubtful.

Inoue Shigeru said: "I have tried it and this microwave oven can be used normally."

"It's unbelievable. Whirlpool in the United States is actually selling microwave ovens made in China. If I hadn't witnessed it with my own eyes, I would never believe it was true." Takamiya still had a sense of disbelief in his tone.

Shigeru Inoue explained: "It now seems that Whirlpool closed the microwave oven factory in Milwaukee and moved the microwave oven production line to China. It is just unclear whether Whirlpool invested in setting up a factory in China or let Chinese companies manufacture it.

."

But one thing that is certain is that the cost of producing microwave ovens in China must be very low, so Whirlpool has the confidence to keep cutting prices and start a price war with us."

"What you said makes sense." Takamiya Yuuto nodded and continued, "I will report this matter to the headquarters immediately and ask the headquarters to send people in China to investigate this matter."

…

In later generations, a lot of information can be found by searching on the Internet. However, in the early 1990s, information dissemination was not developed, not to mention that China was relatively isolated and not a developed economy. It was very troublesome to obtain China's business information.

One thing.

Fortunately, Panasonic Electric has started its presence in China very early. Panasonic staff stationed in China quickly investigated and found out that it was Li Weidong's Puppy Electric that was manufacturing OEM microwave ovens for Whirlpool.

At the same time, Panasonic staff also discovered that Puppy Electric was actually an OEM factory for Xizhi, producing hair dryers and electric irons for Xizhi.

At the same time, Xizhi Electric Appliances is also having a headache due to the sharp decline in microwave oven sales in the North American market.

"President, we have found the reason why Whirlpool can start a price war with us! They closed the Milwaukee factory and moved the microwave oven production line to China. Now Whirlpool's microwave ovens are manufactured by Chinese manufacturers." The subordinate said.

Reporting.

Tanaka nodded suddenly: "I see, no wonder Whirlpool's microwave ovens have reduced prices. They use Chinese OEMs to reduce production costs. Have you ever investigated how much production costs can be reduced if Whirlpool chooses Chinese OEMs?

?”

"According to our estimates, the processing fee for each microwave oven in the United States is about 45 to 50 US dollars, while the OEM fee for each microwave oven in China is only 10 US dollars," the subordinate replied.

"If we produce microwave ovens in Japan, the processing fee for each microwave oven would be close to 4,000 yen, which is about 30 US dollars. In total, Whirlpool's processing fee for each microwave oven is 20 US dollars lower than ours!"

President Tanaka frowned, and then said: "If it is really this price, we have no chance of winning in a price war with Whirlpool. Is your cost assessment accurate? OEM production in China really only costs 10 US dollars.

Is there any OEM fee?”

The subordinate immediately nodded: "This data is absolutely accurate, because the OEM for Whirlpool is our OEM factory in China, Puppy Electric. At first, Puppy Electric also mentioned it to us, hoping that we could transfer the microwave oven production line

When I went to China, the OEM fee he offered was exactly 10 US dollars!”

President Tanaka immediately recalled this incident. It was he who rejected the proposal at that time because he was worried that the foundry would have too much technology and would pose a threat to Japanese companies.

Unexpectedly, Li Weidong did not give up the microwave oven OEM business, but instead acquired Whirlpool's microwave oven production line and became the OEM of Whirlpool microwave ovens.

As a result, Whirlpool significantly reduced production costs, and then launched a price war in the North American market. As a result, the Japanese microwave ovens were defeated, and there was a strong tendency to drive Japanese microwave ovens out of the North American market.

Li Weidong's backhand slap made President Tanaka extremely depressed.

"I still underestimated that Li Weidong. I didn't expect that he would find another way and find an American!" President Tanaka sighed in frustration.

The production cost of Whirlpool microwave ovens is lower. If the price war continues, Japanese brands will definitely be unable to bear it. And if Japanese brands do not offer lower prices, they will not be able to compete with American brands, and will lose the North American market.

The problem is that with Japan's labor costs, the processing fee for producing microwave ovens in Japan will never be reduced to 10 US dollars. In other words, microwave ovens produced in Japan cannot be cheaper than microwave ovens manufactured in China.

For Japanese brands, the only way is to move the production line of microwave ovens out of Japan and set up factories in places with lower production costs.

"Is it really necessary to move the microwave oven production line to China and hand over our technology to the Chinese?"

President Tanaka felt extremely unwilling, but he had nothing to do.

A market as big as the United States cannot be handed over to others! President Tanaka could only be forced to compromise.

After thinking for a moment, President Tanaka said: "Call Minister Watanabe, he is familiar with the Chinese, and ask him to talk to Li Weidong and try to get a better condition as much as possible!

In addition, I remember that Thailand and the Philippines have always been interested in us setting up factories. We contacted our representatives in Thailand and the Philippines and asked them to talk to the local governments and tell them that we were willing to invest in setting up factories and see if we could get

What a preferential policy!

We cannot put all our production capacity in China, we must have an alternative to disperse our production capacity to other places, so that the foundries will not have too much say. I think Southeast Asian countries are a very suitable place."

…

Li Weidong received a call from Watanabe Yuo.

After the two exchanged pleasantries for a few words, Watanabe got to the point: "Li Sang, are you manufacturing microwave ovens for Whirlpool in the United States?"

"It's true." Li Weidong didn't hide it.

"Then do you know that Whirlpool's microwave ovens have launched a price war in the North American market, leaving our Nishiki microwave ovens in a very passive situation?" Watanabe Ou continued.

"I don't know." Li Weidong continued calmly: "I am an OEM. I am only responsible for the production of products. As for the sales of the products or what kind of marketing strategies the manufacturers adopt, it has nothing to do with me.

Already."

"But if you hadn't manufactured microwave ovens for Whirlpool, Whirlpool wouldn't have launched a price war against us!" Watanabe said in a somewhat arrogant tone.

Li Weidong smiled slightly and said with the same forceful words: "Mr. Watanabe, if you had not entered the North American market, Whirlpool would not have launched a price war against you!"

Watanabe Ou was speechless for a moment and began to quarrel, but Watanabe Ou did not take advantage of him.

Li Weidong then said: "Mr. Watanabe, you didn't call me just to complain, right? You should just tell Xizhi Electric's requirements directly!"

"Okay!" Watanabe Yuo continued: "We, Nishizhi Electric, hope you will stop manufacturing microwave ovens for Whirlpool."

Li Weidong did not refuse immediately, but asked: "Then what can I get?"

"We can increase some orders for hair dryers and electric irons. In addition, we, Xizhi Electric, can also provide you with part of the production business of electric ovens." Watanabe said.

Li Weidong said directly: "Mr. Watanabe, I do OEM for Whirlpool, and the annual OEM fee is more than 5 million US dollars. How much is the OEM fee for these new businesses that Xizhi Electric Appliances gave me?"

Li Weidong provides 200,000 microwave ovens to Whirlpool every year for only US$3 million in OEM fees. He said that US$5 million was deliberately exaggerated by Li Weidong to test the bottom line of Xizhi Electric.

Sure enough, when he heard the figure "5 million U.S. dollars," Watanabe Yu hesitated for a few seconds, and then said: "The new business that Xizhi Electric will give you, although it is less than 5 million U.S. dollars, is about the same. But doing business should be

In the long run, we at Xizhi Electric can give you more orders in the future!"

Li Weidong knew that Watanabe was trying to spread the pie, so he decisively refused: "Mr. Watanabe, I'm very sorry. I have thousands of workers here. They have to eat every day and receive wages every month. If I

If wages are not paid, the workers will stop working immediately and beat me up, so I can't wait for a better future."

Watanabe also knew that it was impossible for Li Weidong to give up OEM work for Whirlpool. His previous request was just a sky-high price, so he lowered his request and continued:

"Li Sang, since you insist on OEM for Whirlpool, I hope you can increase the OEM price, so that our Xizhi Electric microwave oven will be more competitive in price."

Li Weidong still did not refuse immediately. He said, "According to the contract I signed with Whirlpool, we will renegotiate the OEM price every three years. If I change the OEM price in advance, I will pay a huge liquidated damages. Please ask Xizhi

Are you interested in electrical appliances and helping me pay the liquidated damages?"

"How much is the liquidated damages?" Watanabe asked subconsciously.

"After changing the OEM price, the difference will be 150%! What I mean is that if I increase the OEM fee by US$10, I will have to pay Whirlpool US$15 in liquidated damages."

Li Weidong laughed and continued: "I think Whirlpool would be happy for me to raise the price, so that they can make a profit."

Upon hearing the 150% penalty for the difference in price, Watanabe once again fell into silence.

Li Weidong felt that the time was almost up, so he said: "Mr. Watanabe, actually I have a better proposal that can solve your trouble.

Your Xizhi Electric appliances only need to transfer the production line of microwave ovens to China and leave it to me. I can guarantee that the OEM fees I charge will definitely be lower than those of Whirlpool.

In this case, the production cost of your microwave oven will be lower than that of Whirlpool's microwave oven, making it more competitive in the North American market!"

Watanabe Xiong pondered for a moment and then said: "Li Sang, to be honest, you are not our only choice for Xizhi Electric. We have contacted the governments of Thailand and the Philippines, and they are very interested in us setting up factories.

Moreover, both Thailand and the Philippines are willing to give us preferential conditions. The labor costs in Southeast Asian countries are also very cheap. If we move the microwave oven production line to Southeast Asia, we can still achieve low-cost production!

In addition to microwave ovens, the hair dryers and electric irons you are currently manufacturing for us may also be moved to Southeast Asia, and you will lose big customers like us by then."

Li Weidong realized that Watanabe Yui disclosed this information to him, which contained a threatening meaning, but it was by no means aimless.

Before the Asian financial crisis, Japan was investing crazily in the Asian Tiger countries. It is certain that Nishizhi Electric will move its production center to Southeast Asia.

However, he did not succumb to Watanabe's threat. He knew that when the Asian financial crisis came, almost all Japanese investments in Southeast Asia became a burden, so Li Weidong was not worried about Xizhi Electric's investment in Southeast Asia.

So Li Weidong said: "Mr. Watanabe, you should be very clear about how profitable a microwave oven is. An ordinary hair dryer can sell for one thousand yen in Japan, while a microwave oven can sell for 60,000 yen in Japan!"

Selling one microwave oven is equivalent to selling 60 hair dryers. Do you think I would give up the microwave oven for the hair dryer?

What's more, if you directly hand over the microwave oven production line to me and let me do the manufacturing, you can keep the microwave oven market without losing the hair dryer market. This is a win-win situation, why not do it!"

Watanabe was silent for another moment, and then asked: "If we hand over the production line to you, how much will you charge for the OEM fee?"
To be continued...