Prinx-Chengshan: Innovation Running through Road of Growth

In 1976, Rongcheng Rubber Plant, the predecessor of Prinx-Chengshan (Shandong) Tire Co., Ltd., was founded. During the past 39 years, Prinx-Chengshan hasexperienced the process of starting from scratch, growing from small to large, from weak to strong and going global, and continuously realized innovation and development by overcoming difficulties with the ups and downs. Through constant self-innovation and adop- tion of world’s advanced technology, Prinx tires stably rank about average in the world at present. Looking ahead, Prinx-Chengshan will aim at the mid- to high- end passenger car and engineering vehicle tire market to increase the technological content of the products, adopt the branding strategy and produce and develop green and environmentally friendly high-performance tires and strive to be one of the world brands in 2018.

Production-study-research cooperative innovation running through the road of growth

In 1981, because of the national adjustment of the tire industry, Rongcheng Tire Plant was not included in the 58designated tire enterprises of the former Ministry of Chemical Industry and the enterprise was at a critical juncture. At that time, the tire industry was vigorously developingthe improvement of “replacing tank with machine” process, with the constraint as double mold vulcanizer. With the research and development of double mold vulcanizer as the only breakthrough, the entrepreneurs of Prinx-Chengshan successfully developed the double mold vulcanizer (1200×2 and SL900×2) with proprietary intellectual property in less than a year by themselves, at the cost of less than 30,000 yuan each, only 1/10 of market price, which not only saved hundreds of billions Yuan for the company, but also greatly improved the quality and efficiency of tires, taking the lead to realize “replacing tank with machine” in China’s tire industry. In the following adjustment of designated factories in China’s tire industry, the company gained new life and ranked among the designated tire enterprises. On September 8, 1987, Gu Mu, then vice premier of the state council, gave high regards for Rongcheng Tire Plant: “It is not easy for a county-run tire factoryto become the second largest tire exporter. We need such Rongcheng Rubber spirit.”

In 1990, Rongcheng Rubber Plant conducted a 10-year technological cooperation with Beijing Research & Design Institute of Rubber Industry, pioneering a new model for factory-institute cooperative development in the industry. On October 8, 1992, 10 types of saloon cars and light truck series radial tires of representative specification produced by China’s first production line of 30 units domestic radial tires successfully passed the technical appraisal of the former Ministry of Chemical Industry, with the quality of the products reaching the domestic advanced level and approaching the international advanced level. Then various products of Rongcheng Rubber Plant won the National Prize for Progress in Science and Technology awarded by the former Ministry of Chemical Industry and appeared in the military paradeof the 50th anniversary of the founding of P.R.C. due to the excellent performance.

With the deepening ofstructural reform and the rapid development of the enterprise, in May 1994, Rongcheng Rubber Plant was reconstructed into Chengshan (Shandong) Rubber Co., Ltd. to become a large state-owned tire enterprise and become one of the 24 key tire enterprises in China. After 6-year development, the problems such as rigidification of state-owned institution and mechanism, obsolete concepts, lack of market awareness, etc. became the shackles for the development of the enterprise, so the production and management can no longer be continued.

After taking-over Chengshan Group, Che Hongzhi, the current president, reorganized the leading group, continued to focus on scientific and technological development, paid high attention to independent innovation and brandbuilding, exploited the advantages of national enterprise technology center and postdoctoral workstation, strengthened the exchange and coop- eration with domestic and foreign research institutions, experts and scholars, carried out an all-round cooperation with Tsinghua University, Peking University, Beijing Research & Design Institute of Rubber Industry and Qingdao University Of Science & Technology in talents cultivation, fundamental research, application of new technology, etc., and organized study tours for technicians to some tire powers such as America, Germany and Japan.

Besides, Chengshan always maintains an increase of 15% in the investment of the research and development of tire technology, with the amount of research and development expenses exceeding one hundred million Yuan. New products have formed serialized production with the contribution rate reaching more than 30%. So far, it has obtained 128state authorized patents and had 469 new and high-tech products with independent proprietary intellectual property rights. On December 19, 2002, 11 products of representative specification independently developed by Chengshan Group, such as “high-performance driven tubeless all-steel cord truck radial tire” and “high-trafficability light truck radial tire”, passed the national technical appraisal. The company has been successively honored with National Advanced Grass-roots Party Organization (the only one in the tire industry at that time) and Chengshan tire was once recognized as “China Top Brand” and “China Famous Brand”.

Ten-year joint venture accomplishing global company

In 2005, with great development and various economic indicators ranking top, the Group decided beyond everyone's expectations to proactively share rights and profits and joint-ventured with Cooper. Facing the incomprehension and even opposition from the employees and customers, the Group decision-makers said, “it is not because that Chengshan could not afford to run it orruns worse than others, instead it is to make the traditional industries of Chengshan be stronger, bigger and longer and finally realize the internationalization of the company. Although Chengshan Group was on top at home and ranked 13th in the tire industry around the worldthen, there was still a large gap in scale, technology, brand, market, innovation ability, etc.compared with the world’s tire magnates. It is the hard truth to achieve the internationalization of the company by virtue of the above advantages of these century-oldworld thriving enterprises.” In January 2006, Chengshan cooperated with Cooper, the second largest American tire company and ranking 8th in the world, in tire business, its best main business, to establish Cooper-Chengshan (Shandong) Tire Co., Ltd.

However, the course of internationalization is not smooth since it needs time to adjust the differences in management and operation ideals caused by different cultural backgrounds. Therefore the enterprise performance declined from 2006 to 2009 with the annual average pretax profit of only 19,310,000 Dollars, much lower than 30,000,000 Dollars before joint venture. And the company also replaced the general manager for 5 times successively. After 3-year adjustment, both sides made the decision that Chengshan team mainly directed the running of company for that they were more familiar with Chinese market and Chinese consumers. Then the company greatly improved its performance from 2010 to 2012 with the realized annual average pretax profit of 72,570,000 Dollars and became the one with the largest scale and best benefit of the 8 Cooper factories.

While Cooper-Chengshan was making a great plan for its future, an announcement was delivered by American Cooper Company and Indian Apollo Tyres Ltd. on June 12, 2013, that the latter acquired the former for the full liability of 2.5 Billion Dollars; however, over debt surely would result in tough operation and even bankruptcy of the company in the future, therefore, 5000 employees of Cooper-Chenshan hold strong opposition to it. After activities in right defence such asstruggle and media disclosure for one and a half years, on November 30, 2014, Chengshan Group acquired 65% of American equity of Cooper-Cheng- shan for 285.4 Million Dollars. After the completion of business transaction, it was renamed Prinx-Chengshan (Shandong) Tire Co., Ltd.

After 10-year experience of internationalization, the company has obtained the normalized management experience and advanced technology of multi- national corporations. Besides, the company realizes complementary advantages in technology, market and management by capital integration. With green, clean, low-carbon and cyclic development as a main line, the company reaches a new height in scientific and technological innovation ability andlevel of internationalization development to lay a solid foundation for becoming a thriving tire company in the world.

“Blue” technology being adopted to enter into the mid- and high-end market

At present, Prinx-Chengshan has an annual capacity of 15 million tires, including 5 million all-steel tires, 8 million semi-steel tires and 2 million bias tires. Now it has 4 brands: Prinx, Chengshan, Austone, and Fortune, covering passenger car tires, commercial ve-

hicle tires, industrial tires, agricultural tires and partial special vehicle tires. It possesses more than 8000 retail stores at home and caters to different requirements of the customers from more than 130 countries and regions in the world. In addition, Prinx-Chengshan is also the mainstream supplier for more than 30 large engine plants such as CNHTC, FAW, JMC, Qingling Motors, Hongyan,Dongfeng Liuzhou Motor and JAC.

With its rapid developmentunanimously recognized by the industry, Prinx-Chengshan became one of the first 97 industry leaders awarded industrial brand demonstration enterprises in 2015. In November 2015, Prinx-Chenshan won the CGMA issued by CIMA, the largest managerial accountant organization in the world, and the management level received worldwide recognization.

Since 2015, apart from construction of intelligent factory and digital workshop, according to the requirements form the domestic and foreign customers, Prinx-Chengshan fully cooperated with the world-leadingtire technical team of Germany to adopt “blue” technology to develop 9 series of Prinx-series tire products of 70 specifications covering comfortable saloon car, AT SUV and sports saloon car, etc., which simultaneously appeared in the global market in September. With substantial promotion in comprehensive indicators such asappearance, practical quality, safety performance, environmental protection and energy conservation, riding comfort, the new products possess such eight characteristics as safety, high speed, comfort, fashion, green and environmental protection, low rolling resistance, low noise and wet skid resistance. After actual road test of high-end passenger cars and examination of international authoritative institutions, the products have reached the international advanced level of like products.