Evonik In China

IT'S COMMON during economic crises for companies to shut down plants, lay off people, and generally become concerned with cutting costs. Dahai Yu, president of the specialty chemical maker Evonik Industries in the Greater China region, sees the current period as a good time to initiate new programs. Evonik is in the process of implementing a "growth initiative" in its China region, a territory that includes China, Taiwan, Hong Kong, and Macau.

"People will ask why we would launch a growth initiative now," Yu says. "But it's because we think long term about this market." As part of the program, Evonik is reorganizing its internal processes, hiring new talent, looking for new market approaches and investment opportunities, and stressing its internal training programs.

The global economic slowdown is, nevertheless, having an impact on Evonik's operations in the China region. Sales to the automotive and construction industries took a hit in late 2008 and early this year but started to rebound in March. It's not clear whether that trend will last. On the other hand, Yu notes, the global downturn hasn't had much impact on sales to the pharmaceutical, agrochemical, and animal-feed sectors. On the whole, in 2008, the company experienced a sales increase in the China region of about 10% to $1.1 billion.

Until 2008, Evonik's sales in China expanded at a runaway pace—in excess of 25% annually, according to the firm. Growing at such a rapid pace, Yu says, is difficult to manage. "Fast growth means fast change, and that in itself is similar to a crisis situation," he says. "At present, when growth is slower, we can focus on rethinking how we interact with our customers, take a look at our costs, and change how we operate internally." Evonik, Yu predicts, will emerge from the business slowdown in China in a stronger market position than the one it went in with.

By local standards, Evonik's growth in China has been relatively tame. Yin Chao, general manager of the Hubei-based silane coupling agent producer Jingzhou Jianghan Fine Chemicals, tells C&EN that his firm's sales roughly tripled from 2005 to 2008, when they reached $48 million. He is surprised at Evonik's "depressed" growth in China. Evonik is one of the world's leading producers of silane coupling agents, which are used in the tire-making process to help hold disparate materials together.

Compared with Jianghan, which employs 380 people, Evonik is a large company. In the China region alone, the firm has about 4,000 employees, or 10% of its global headcount. About 600 of those workers report to Shanghai's Minhang district, where the company has its regional operations headquarters and an R&D center.

One of Yu's particular focuses over the past few months has been on making sure that Evonik's people work together for the benefit of the organization. To achieve that, Yu organizes multidepartment meetings at which managers stress that departments must work together to solve problems. This emphasis on cross-departmental cooperation is unique to the China region, he says, and not something that Evonik stresses as much elsewhere in the world.

Another way to foster esprit de corps between departments is through training sessions. According to Yu, Evonik has not cut its training budget in the China region since the downturn began late last year.

Lynchem, a pharmaceutical ingredient producer in the northeast city of Dalian, is one business that is being more closely integrated into Evonik. The firm acquired a majority stake in Lynchem in 2006 before taking full ownership last year. Yu says Lynchem's practices in the areas of accounting, employee management, and health and safety are being brought in line with its new parent's, sometimes with the help of executives Evonik flies in from abroad.

Yu, the first Chinese native to head the company's operations in the region, has lived about half of his life in Europe. Now 48, he obtained a Ph.D. in chemistry in Hamburg, Germany, in 1989 and joined Evonik, then Degussa, in 1990. Prior to returning to Shanghai in October 2006, he had headed Degussa's global agrochemicals and intermediates business for three years.

Yu counts his experience as a Chinese person living many years in Europe as an asset. "I make sure we benefit from what Europe has to offer, but I can also make it clear to colleagues in Europe what the specific characteristics of the market in the China region are," he says.

AS A MANAGER, Yu explains, one of the particularities of working in China is that he has to become emotionally involved in what he does. "People want to feel what kind of person you are," he says. "You have to express more of your personal views to your colleagues and clients." This practice, Yu says, is far from being a burden, and he would like to see more of Evonik's managers in Europe express this kind of passion.

But helping Evonik adopt Chinese business practices is not one of Yu's priorities. His main focus remains on making Evonik operate as one organization in his territory, so that it is ready for the return of fast economic growth in China. "It's the nature of specialty chemical makers to operate in a decentralized way," he says. "But within that context of decentralization, we need to be united as one."