Opening plant here is a walk in the park

Early last year, Invacare Corp. of Elyria joined a growing list of North east Ohio companies with factories in China.

It did so with an eye toward cutting costs, but also with a desire to one day reach China's growing consumer market.

Invacare picked one of the premier industrial parks in the country, a sprawling concentration of plants about 40 miles west of Shanghai called Suzhou Industrial Park.

Even with the park's prime location, start-up costs for Invacare were 40 percent less than it would have faced opening a plant in Cleveland, the company said.

Operating costs are 20 percent to 30 percent lower, as well.

Savings aside, the quality of sites like Suzhou Industrial Park make investing in China a less anxious decision for many foreign businesses.

The park is a controlled, safe environment, said Kim Kirkendall, a China consultant with Office Outsource Inc. in Richfield who managed two factories in China in the late 1980s. It has become a model for others in China to imitate, she said.

Suzhou Industrial Park has many things going for it. Located in the burgeoning Yangtze River delta, it has a large pool of professionals and production workers from which to draw.

It provides easy truck access to the Port of Shanghai and it has a special zone for exporters that provides extra security.

The park guarantees a reliable flow of electricity, which can't be said for other sites in the country, and provides easily accessible broadband service.

"Stuff that people don't associate with China," said Matt Mullarkey, vice president of global operations and supply chain at Invacare.

Industrial park manage ment also cuts through red tape to help for eign companies get permits so they can be up and running quickly.

As a result, the park has been extraordinarily successful at attracting multinational manufacturers, including other Northeast Ohio firms such as Eaton Corp. and Ferro Corp.

The park's 27 developed square mile are home to nearly 2,200 foreign-owned enterprises, mostly manufacturing plants.

Park is a hot spot for foreign firms

Many Americans may not have heard of Suzhou because it's a second-tier city in the shadow of Shanghai.

But it's a culturally significant area with beautiful gardens and a pleasant downtown plaza where traditional pagoda-style architecture mixes with McDonald's, Kentucky Fried Chicken and Pizza Hut. Young people in jeans appear as self-absorbed and self-conscious as their counterparts in the United States.

One of the main roads to Suzhou from Shanghai is the Huning expressway toward Nanjing.

The road recently was expanded from a two-lane divided highway to four lanes in each direction, said Dennis Snyder, director of operations for Invacare in China.

Snyder takes the highway to work every morning from his home in west Shanghai.

A driver picks him up at his apartment in a silver Buick van.

Along the way, factories are interspersed with rice fields and farm houses.

Boats still ply canals to move crops and construction materials.

Ponds nurture freshwater pearls. In a lake near Suzhou, a regional delicacy called hairy crab is harvested.

In the fall, fisherman bring crabs to the roadside for sale to passing motorists, not unlike what you might see in Maryland and Virginia towns around the Chesapeake Bay.

Inside the industrial park, which is east of old Suzhou, roads are smooth and well-maintained.

Hedges in the median are neatly trimmed.

At the entrance near the highway is what looks to be a Christmas tree farm, but it's really an inventory of greenery to be planted around the park, Snyder said.

Invacare opened its plant in Suzhou in March 2004, not far from National Semiconductor and Siemens operations.

The factory makes oxygen concentrators, which remove gases from the air so they can pump nearly pure oxygen to someone who has breathing difficulties.

About 140 people are involved in the process, from the salaried department heads to the 110 production workers who earn about 1,500 to 2,000 yuan, or $185 to $250, per month.

A mid-level professional might make three times the production wage.

Professionals often live in the apartment buildings that have sprung up in clusters around Suzhou and appear like mini-downtowns on the horizon. Production workers more than likely live in older and cheaper housing in the city, Snyder said.

Nearly all Invacare employees arrive at work in buses provided by the company.

That's a common arrangement in the park, as the plants tend to have small parking lots.

While most of the concentrators are shipped back to the United States or elsewhere in Asia, the company is developing models with different characteristics that are more suited to local markets.

Eaton's Suzhou plant has already tapped into the Chinese market.

The factory makes electrical switches that lower voltage to commercial buildings and provide circuit protection. Eaton has 17 plants in China, mostly wholly owned.

Their main market is China and its rapidly expanding infrastructure.

Setting up shop at park is a breeze

The ease with which a company can get established in Suzhou Industrial Park would breed envy in businesses back in Ohio. It takes about 45 days to compile all the information demanded by park management, Invacare's Mullarkey said, and then the approval process takes only about 15 days.

Everybody a new company needs to see will come to the park management building. Banks, for instance, visit there to discuss opening accounts. They compete against each other on services, such as transferring money and managing "chops" - stamped signatures that go on official company documents such as contracts and tax forms. Unlike in the United States, where companies can easily transfer money to foreign accounts, foreign exchange is tightly controlled in China. If Invacare buys valves from the United States to install on Chinese-assembled concentrators, the amount of Chinese yuan exchanged for U.S. dollars must match the value of the valves.

Park management also puts companies in contact with customs officials to make sure imported parts can clear customs and to determine if duties have to be paid.

"We found that their one-stop shop was as good as it gets," Mullarkey said.

He also liked the integrity of the park. Other industrial parks in China may solicit bribes for doing business, Mullarkey said, but Suzhou officials made no such attempts.

The security arrangements also were critical; China is notorious for not enforcing intellectual property rights.

In the park's export processing zone, where Invacare is located, all vehicles are subject to inspection going in and out, limiting the chances someone can leave with products.

Invacare also tracks its computer drawings so it knows who has seen them.

And there are other precautions. Invacare, for instance, buys parts from several different suppliers.

"We don't give anybody the chance to put the whole puzzle together," Mullarkey said.

Mullarkey believes such steps are necessary.

He said he knows companies have purchased Invacare's products for no other reason than to figure how they are put together.

One day last year, he and Snyder were visiting a supplier near Nanjing "and lo and behold, we look in their technical shop and there is our concentrator, all torn apart."

As Suzhou fills up, new parks are developed

The Suzhou park was created jointly by Singapore and China in 1994 at the urging of the Chinese central government.

And while it will continue to attract companies, Office Outsource's Kirkendall said, it has become overdeveloped.

Other parks have popped up around it with perhaps a slightly lower cost of doing business.

Several Northeast Ohio firms have factories in a park on the west side of Suzhou.

Invacare put a second plant, which makes power bases for electric wheelchairs, in a park in nearby Kunshan because it's closer to suppliers and doesn't require the security of an export processing zone.

But Invacare has kept its custom wheelchair production in Elyria because of the quick turnaround and proximity to market that's required, Mullarkey said.

Already, land costs are rising in Greater Shanghai and approaching those in Western countries. One day, companies in Suzhou Industrial Park may be looking farther west to take advantage of lower production costs.

It's the same kind of migration the United States has gone through with jobs moving from higher-cost northern states to the South.

While Invacare is happy in Suzhou Industrial Park and has no plans to leave, its next expansion could be farther west in China as more roads and railways are extended and more sites like Suzhou are added to the landscape.

"In fact, they're happening as we speak," Mullarkey said.

To reach this Plain Dealer reporter:

pkrouse@plaind.com, 216-999-4834