Entrepreneur finds possibilities problems are vast when doing business in China
March 30, 2008 4:00 AM
Jack Perkowski, author of "Managing the Dragon," speaks at the University of Pittsburgh's Katz Graduate School of Business Thursday.
By Dan Fitzpatrick Pittsburgh Post-Gazette
Before venturing halfway around the world to become the businessman known as "Mr. China," Jack Perkowski was a North Catholic High School student seen hitching rides along Routes 28 and 8, up Dorseyville Road and past Meinert's Farm in O'Hara. It was an eight-mile trip home, each day.
"I used to thumb from here," he said, pointing to a spot where a gas station once stood along Route 28, just below Troy Hill. "A lot of times I'd get a ride to Etna and then I have to get another ride to the top of the hill."
On a recent visit back, the barrel-chested, silver-haired Mr. Perkowski is dressed in dark suit, blue shirt and red tie, home to give a few speeches, talk to some students, make a few TV appearances and promote the release of his first book, "Managing The Dragon."
Surveying his boyhood O'Hara home on Dorseyville Road (where his 89-year-old mother Adele still lives), the town of Sharpsburg (where he attended a Polish Catholic grade school) and the roads he traveled with help from strangers, the 59-year-old acknowledges how improbable it was that a descendant of immigrant steelworkers could make it to Yale University, then to Harvard Business School and the pinnacle of Wall Street before betting everything at age 42 on China -- by no means a sure thing in 1991, two years after the protests and shootings in Beijing's Tiananmen Square.
Despite an array of obstacles and near-failures, he did what few Westerners can claim -- the building of a profitable company from the ground up inside the world's largest Communist nation. Beijing-based ASIMCO Technologies now employs 12,000 and books more than $500 million in sales. Nearly all of Mr. Perkowski's employees are Chinese and 85 percent of his diesel fuel injection systems, piston rings, starters, alternators, air compressors, brake products and castings are sold within China, via 17 manufacturing plants and 52 sales offices.
"I've never heard of another Westerner who has come to China," he writes, "equipped only with a concept and 20 years' experience, and built a company that has become a major player in one of China's largest industries. ... Some will say, with some justification, that it was foolish on my part even to have attempted any of this."
Before he left New York for China in December 1991, Mr. Perkowski was already a well-known Wall Street figure as head of investment banking for Paine Webber -- on Black Monday, in fact, The New York Times ran Mr. Perkowski's picture and quotes on its front page (which Mr. Perkowski has framed in his Beijing office).
But he gained larger fame via China. New York Times columnist Tom Friedman featured Mr. Perkowski's China experience in the best-selling "The World is Flat" (in fact, it was Mr. Friedman who first suggested to Mr. Perkowski that he write his own book), and the nickname "Mr. China" comes from a 2005 book of the same name. The author was Mr. Perkowski's partner during the early 1990s, when the two traveled across China in search of investment opportunities, knocking down the requisite glasses of baiju and swallowing "every part of every animal" during dinners with provincial officials.
But "Mr. China" was hardly flattering -- in fact, it read as a cautionary tale about the hubris and missteps of Westerners trying to make money in China, with Mr. Perkowski, referred to only as "Pat," as the prime example. Mr. Perkowski said he has no interest in reading "Mr. China," which he dismisses as a glass-half-empty portrayal of what occurred. "Managing the Dragon" is his attempt to clarify what happened to ASIMCO, and how he was able to recover from early mistakes. The subtitle speaks to a message he hopes will resonate: "How I'm Building a Billion-Dollar Business in China."
While many books have been written about China's rise, about the opportunities provided by its transition to Western-style capitalism and population of 1.3 billion, Mr. Perkowski claims his is the first from a person who has truly lived the life, day to day. The book and a blog (www.managingthedragon.com) are part of Mr. Perkowski's plan to turn himself into a "franchise" on the issue of doing business in China, making him available to explain the country to anybody who's interested.
He claims there are only two rules for doing business inside China: that "everything is possible" and "nothing is easy." To succeed, he said, is to build a strong management team; this, in fact, is Mr. Perkowski's central point: "There's no way around it," he writes.
He learned this lesson by experiencing the problem firsthand -- a series of mishaps that started with receivables collection and inventory management and ended with fraud and near-riots in his factories led him to conclude a "management gap" exists. Chinese-born managers, he writes, are either "highly bureaucratic" or "highly entrepreneurial." With the latter group, "you simply can't sleep at night, since you never know what these cowboy entrepreneurs will do" (one he hired set up a rival plant under his nose; another took $5 million and fled to Las Vegas).
The turning point for his enterprise, which floundered in the mid 1990s, was a tortured transition beyond Plan A (hiring ex-pats to oversee his factories) and Plan B (trusting the business to local managers and Communist Party officials) to Plan C (firing the old managers and replacing them with Chinese-born recruits who could offer "open-mindedness, management education and prior experience with a multinational").
Another revelation from "Managing the Dragon" is how critical Pittsburgh and the examples set by Mr. Perkowski's family were to what happened decades later in the Middle Kingdom. His choice to leave for China in 1991 without knowing the language (he still cannot speak Mandarin) was akin, he writes, to what his grandparents did at the beginning of the 20th century, except his grandparents had only "pennies in their pockets" and hope only of escaping poverty or military service under the Russians (in the case of his maternal grandfather). Both his grandfathers found work in the then-burgeoning Pittsburgh-area steel industry, in Etna and Lawrenceville.
His mother was one of six siblings and worked as an AT&T long-distance telephone operator. His father, John, one of 10, left school after the ninth grade to work in a steel machining shop. John Perkowski also fought in World War II as an infantryman, experiencing hand-to-hand combat in the jungles of the Pacific, before returning to purchase a two-story, two-bedroom house on Dorseyville Road for $7,500 -- using $7,000 in cash he had saved from his U.S. Army paychecks and wedding gifts plus $500 borrowed from an uncle.
The house is still there, painted white and green, shaded by trees and set on a three-quarter-acre lot. Out back are the plots where a young Jack Perkowski, two brothers and two sisters tended to fruits, vegetables and 30 chickens that provided the family with a steady supply of eggs and meat (his father was the one who wielded the cleaver).
One "painful experience" recalled by Mr. Perkowski in the book was the time his father lost a metalworking job when his employer moved to the Midwest in search of cheaper labor. Jack Perkowski was 12, and with Pittsburgh in the midst of a recession, it was " a tough time for us," he writes in the book. "My father took whatever jobs he could, my mother cleaned houses, my brothers and I had paper routes and mowed lawns, and my sisters baby-sat."
One of those lawns belonged to Malcolm MacGregor, who lived nearby.
"These were simple people," said Mr. MacGregor, now 79. "It was just a hardworking, conscientious All-American Polish family." And, "Jack was really exceptional in everything he did," with a "work ethic that became part of him through his family."
"It's no wonder I feel so much at home in China today," Mr. Perkowski writes in the book. The traits of his own family -- education, work, self-reliance, conservatisim -- "are cornerstones of Chinese family life, and have been for centuries."
Still, growing up in a working-class Pittsburgh family, "it really wasn't a foregone conclusion you would go to college," Mr. Perkowski said, "let alone a place like Yale." It was Mr. MacGregor, former North Catholic football coach Joe Wirth, Alloy Rods Corp. chairman Bob Egan and Jones & Laughlin sales executive Jim Mourkas who urged young Jack to consider the Ivy League -- which he calls a "turning point" in his life. The help from elders also provided another parallel to doing business in China -- the importance of relationships, or guanxi.
Mr. Perkowski now spends most of his time either in Beijing, where he and his wife, Carleen, share an apartment, or a farm in Lambertville, N.J. But the ties to Pittsburgh remain active. In November, members of the Rooney family invited Mr. Perkowski and his mother to a Steelers game in Baltimore as their guests, and he remains close with friends and business associates here, from Gateway Financial's David Malone (a fellow North Catholic graduate who introduced him at a Duquesne Club event last week) to investment bankers Sam Zacharias and Andy Russell.
Mr. Perkowski said he has an interest in taking technology developed here to China, and that he might expand ASMICO into distribution or environmental technology, as a next step beyond auto components.
"Someone asked me if the book is my swan song. I said 'no.' As Winston Churchill said, 'this is not the beginning of the end, it is the end of the beginning.' I think the next 10 to 15 years in China are going to be even more exciting than the last 15." After all, he moved there at age 42 "because I thought China would be a big story for a long time, and so that I would always be relevant. That's what I like about what I am doing."