"What does Chinese mean?"

In a small reception room of Shuanglu Company in Birmingham, England, several high-nose Westerners looked at a fax paper with some doubts and some uneasiness on their faces.

"The Chinese firmly demand that we reduce the price of compressors below $80 million, claiming that if we exceed this price, we will lose the opportunity to bid. Can we regard this as their ultimatum?"

The person speaking was from Albert, the sales director of Shimanz. He came to Birmingham at the invitation of Shuangluo Company to discuss the export of long-distance natural gas compressors to China. The fax paper on the table was a letter sent by the China Planning Commission to Shuangluo Company. The letter of similar contents of Shimanz has also received. The letter from China Planning Commission to several companies was consistent, which is to point out that the quotations of these companies were seriously inconsistent with the market price. He hoped that they would requote according to the market price level, that is, each compressor should not exceed US$80 million. Otherwise, China would regretfully consider obtaining compressors from other channels.

Schlaire, sales director of Tongyong, the United States, who was also invited, said disdainfully: "This is their old routine, and he hopes to use this threat to force us to make concessions. In fact, they are eager to implement their West-East Gas Pipeline Project. If the compressor order is not completed now, their West-East Gas Pipeline Project will not be started. Our intelligence personnel have obtained the attitude of the senior management of China on this matter from some channels. This project is a project that senior management is determined to win. Officials of the China Development and Planning Commission cannot be tough on this issue."

"We've known this a long time ago," said Maxwin, sales director of the host Shuangluo Company. "If I'm not mistaken, the three of us should have maintained the same caliber, that is, the price must be above $140 million per unit, and we don't accept lower quotations. They have threatened verbally more than once in the past, but it's the first time that they have written this threat on paper. I feel that this time their threat seems to be tougher than before."

"What does it mean to write on paper? Does it mean they can't go back on their word?" Schlaire said. "I think they just want to use this method to scare us. Whether it's a verbal threat or a paper threat, they can go back on their word. We've seen a lot of this in the past."

Albert shook his head and said, "Mr. Schlaire, I don't think I can't be too optimistic. Chinese people have always been very cautious in doing things. They will not leave any handles for others. Their requests on paper mean that the cost of their repentance will be very high. You know, these people are all officials, and even if we don't use these handles to threaten them, they should be worried about the pickiness of their colleagues. After all, there is no evidence for verbal threats, and such official letters are to be deposited in the archives."

"But I can't understand, what do they plan to do if we really bite it and never cut the price?"

"Don't it say on the fax, they will seek to obtain the compressor from other ways," Albert said.

"Other ways? Are there any other ways in this world?" Schlaire said with a sneer. "The Japanese have also made natural gas compressors, but their land area is too small and they do not need to transport natural gas for long distances, so their compressors are all for short-range transportation and do not meet the requirements of the Chinese. The Russians have made similar products, but can the Chinese trust the quality of the Russians' products?"

Maxwin hesitated, "What if they really turn to Russia to buy?"

"Then there will be fun." Schlaire laughed. "Let's just wait and see their natural gas pipelines rust there. Russian equipment is broken for at least half a year. And since the collapse of the Soviet Union, the Russians have never produced such products. It turns out that whether those factories still exist is a suspense."

"Maybe this is true." Albert accepted Schlaire's judgment. They were all people in this industry, and everyone knew the situation in the industry. Shimanz also had long-term cooperation with China. Albert knew that although Chinese people care about the price when purchasing equipment, they care more about the quality. Russian products may be difficult to catch the eyes of the Chinese.

"So what is our strategy?" Albert asked instead.

Schlaire said: "I think we should stick to the original quotation and not succumb to the threat of the Chinese. Our past lesson was to suppress prices from each other and allow the Chinese to make profits. The three of us can produce such products in the world. As long as the three of us form a price alliance, the Chinese will have no choice."

Albert and Maxwin looked at each other, and Maxwin asked tentatively: "Mr. Schlaire, I think we should give the Chinese a step, such as a slight reduction of about 5% to show our sincerity. You must know that Chinese people care about face, and I think Chinese officials may not be able to explain to their superiors, so they put pressure on us with such a tough attitude. If we insist on not making any regression, they may really drag us down because of face, and dragging it down is not good for us."

Our family knows their own affairs. China is eager to purchase equipment from companies such as Shuangluo, and these companies are also eager to sell equipment. Any product has a technical cycle. The existing long-range natural gas compressor technology of several companies such as Shuangluo is on the verge of elimination. They urgently need some funds to start the research and development of the next generation of technology so that this technology can be consistent with the technological trends in the world today. The wool comes from the sheep. To develop the next generation of technology, the funds can only come from the previous generation of technology. If they cannot obtain new orders, they have to withdraw funds from the sales of other products to carry out the research and development of this product, which also means that the investment in the research and development of the previous generation of products cannot be recovered, which is not conducive to the company's long-term competitiveness.

If it were more than ten years ago, several companies would not have to care about the attitude of the Chinese, because Europe and the Americas were building natural gas networks at that time, and local demand would be enough to provide them with sufficient profit sources. Nowadays, the construction of natural gas networks in Europe and the United States has been completed, and the construction of the next generation network is still far away. The market for natural gas compressors can be said to be in a state of disagreement. At this time, China suddenly started the construction of a large-scale natural gas network, which was like sending a life-saving straw to several companies. They hoped to obtain enough profits from China's orders to support the research and development of next generation technologies.

In order to avoid diluting profits due to bidding, the three companies chose to conspire. They agreed to follow the same price standards and China's quotations. In the end, no matter which company wins the bid, part of its business must be subcontracted to the other two OEMs. At the same time, the three companies also decided to set up a joint R&D institution to jointly develop the next generation of natural gas compressor technology, and the final results will be shared by the three companies so that these three companies can maintain their absolute technological advantages in the market.

The idea is very beautiful, but it still needs to go through the China Development and Planning Commission. Only the prices quoted by the three companies have been recognized by the China Development and Planning Commission. If the money is paid out, the subsequent things can be done. If the China Development and Planning Commission does not accept this price and the transaction cannot be reached, then no matter how beautiful the idea is, it will be a bubble.

When agreeing the price, Albert proposed that the price level of over 140 million is too high, far exceeding the reasonable price, which may cause displeasure among China. But Schlaire believes that the construction of the international natural gas network has stopped at present, and there is no reference system for the price of long-range natural gas compressors. Indeed, the price of such compressors can be found a few years ago, and changes in price levels and manufacturing costs can also be calculated. China can indeed make an expectation of product prices. But expectations are not the same as facts. As long as several companies insist that some factors have caused product prices to rise, what can China say?

In fact, even the price of 80 million per unit is far exceeding the real cost. After compensating for the early sunk costs, several companies are still profitable even if they ship at a price of 40 million per unit. China can accept the price of 80 million, and it can also accept the price of 140 million, because only three of them in the world can supply the goods. No matter how high the price is, what can you do?

The reason why Schlaire can say this is that he knows that the top Chinese leaders have made a decision that the West-East Gas Pipeline Project is impossible to cancel. Will a large project with an investment of tens of billions of dollars stop because the price of a compressor is 60 million more? Obviously it is impossible. Since the other party must purchase, why don’t he ask for a sky-high price?

Max and Albert finally accepted Schlaire's opinion and conspired with Tongyong Company to raise the price. China was shocked by the price they quoted and showed anger at one point, but all three companies could see that China's anger was helpless. As long as they gritted their teeth and did not let go, China would have to compromise.

Just when victory was in sight, China sent them such an ultimatum letter, which pushed the price back to the level of 80 million, and claimed that this was the upper limit that they could accept. If the three companies did not agree, China could only consider other procurement channels. Maxwin and the others had never been worried about the so-called other channels because they believed that this channel did not exist. However, if they had a too stalemate with China and the other party could not come to Taiwan, resulting in a suspension of procurement and several companies could not withstand it.

This is called hitting a wolf with a scoundrel, and both ends are afraid.
Chapter completed!