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Advances Newsletter, October, 2013
1
Vol. 3, #8, October 2013, No. 32
Smart Phones, Smart Appliances
RAC’s new software shows the first step towards a fully connected home
Advances Newsletter, October, 2013
2
ADVANCES Newsletter
Contents
Midea Advances Newsletter is published monthly
by the International Strategy Department of
Midea Group. We welcome all comments,
suggestions and contribution of articles, as well as
requests for subscription to our newsletter. You
can reach us by email at: [email protected]
Address:
ADVANCES, International Strategy Department
Midea HQ
No. 6 Midea Road
Beijiao, Shunde, Foshan, Guangdong
P.R.C. 528311
Tel: +86-757-2360 4714
Web: www.midea.com
Managing Editors:
Matthew Smith
Mandy Wang
Regular Correspondents:
Alex Cheng
Himani Joshi
Amber Liu
Crystal Lun
Blinda Li
Tony Miao
Peck Zhao
Sandra Sun
James Yu
Daniel Zhang
Sue Ou
NEWSLINE
Laundry Division Holds AMCI
Seminar PAGE 4
Midea Rock-themed
Product Launch in Rio PAGE 3
Midea Launched New Air-
cooler Liva in Brazil PAGE 3
RAC R&D Intellectual
Property Seminar PAGE 5
The Aurora “1 kWh per Night”
Air Conditioner Debuts at
Canton Fair PAGE 5
www.midea.com
Midea Group Lists on the
Shenzhen Stock Exchange PAGE 11
PAGE 16
FEATURE
SNAPSHOT
PEOPLE
A Controlling Type of Guy PAGE 13
Midea Wins 2013 China
Industrial Design
Innovation Award PAGE 7
Midea RAC National
Holiday Sales Up 80% Over
Last Year PAGE 6
CMI Organises its First Midea
Achievers Meet in Thailand PAGE 9
Climate Solutions for a Green
Environment, in Pakistan & Sri
Lanka PAGE 8
Midea’s Next-Gen Heat
Recovery DC Inverter VRF PAGE 10
Smart Phones, Smart
Appliances PAGE 12
RAC Rewards Excellence in
its Sales Force PAGE 6
Midea CAC Won the Trading
Center Project in South China
City PAGE 9
Advances Newsletter, October, 2013
3
Midea Rock-themed Product Launch in Rio
By James Yu
M idea has recently unveiled its limited-edition “Rock
in Rio” line of refrigerators on e-commerce website, Submarino.
This coincided with the Rock in Rio festival, which took place
between September 13-22. The limited run includes two stylized
models with capacities from 45 to 116 liters, to satisfy the most
fervent fans at the festival.
Versatile for use in everyday life, these refrigerators have a
door reversal device, which allows the door to swing open from
both sides, allowing maximum flexibility in any environment.
The models have an "extra cold" setting, which specifically
keeps beer at the perfect
temperature, and a sys-
tem cooled compressor,
to ensure optimum con-
ditions for long-term
operation. The entire
lineup has a Procel "A"
energy rating, which indi-
cates a superior level of
energy efficiency.
Fans of rock‟n‟roll
may find these models on
the Submarino website,
which has been named as
the official online store of
the Rock in Rio event
(www.submarino.com.br/
RockinRio).
According to Midea
Brazil Marketing Director,
Henrique Mascarenhas, this
move reinforces the influ-
ence that Midea as a brand
is gaining nationwide as a
key player in retail applianc-
es. "Being alongside the biggest musical event in the world
demonstrates Midea‟s strength in satisfying its demanding con-
sumers, and how innovation and boldness in our products are
associated with a contemporary lifestyle."
NEWSLINE
Midea Launched New Air-cooler Liva in Brazil
By James Yu
M idea‟s new air cooler combines its best
features to combat the effects of dry air that is typical
of the hot climates Brazil. In addition to cooling the
environment, this new model boasts a 200% increase in
humidifying power in this category.
With the new Brisa function, customers enjoy a
unique design that spreads fresh air over a wider area,
and can be enhanced by a special gel pack placed in the
removable water tank.
"The New air-cooler was rigorously designed to
meet the exacting standard of Brazilian consumers.
Starting with this new product, we aim to provide solutions that
meet real needs, and to pursue higher levels of comfort
and economy for families," explained Midea Brazil‟s
Director of Marketing and After-sales, Henrique Mas-
carenhas.
The Liva air-cooler has three different levels of
ventilation and air filtration, schedules specific to
sleeping pat-terns, a sleep function indicator for water
level, and a decrease in power consumption.
Advances Newsletter, October, 2013
4
Laundry Division Holds AMCI Seminar
By Blinda Li
I n order to further develop
manufacturing ability and efficiency,
along with establishing objectives and
strategies for the next 3 years, Midea‟s
Laundry Division opened its Annual
Manufacturing Competence Improve-
ment (AMCI) Seminar this month.
This seminar helps its partici-
pants to fully understand manufactur-
ing benchmarks and how they figure
into analyzing internal problems. To
aid in this, seminar organizers invite
foreign experts to deliver lectures and
share their own experiences in manu-
facturing improvement.
One of these foreign experts was
Michio Ohta, who appealed to at-
tendees for his style of explaining his theories in very simple and
straightforward ways. His topics covered the definition of a fac-
tory, the fundamental forces of manufacturing, the reasons for
failure in improvement, and a peculiar paradox apparent in the
lean production improvement process.
Michio Ohta walks the audience through the lean produc-
tion improvement process.
Next up was Zhong Lixiang, a seasoned lecturer on lean
production, who explained his method for laying down a firm
foundation, and how to improve the Laundry Division‟s com-
petitiveness by sharing classic and thought-
provoking case studies with everyone.
After the lectures, participants engaged in
discussions about “T+3 production and
sales integrated operating pattern”,
“thorough quality control”, and
“manufacturing efficiency and technical im-
provement”, all based on the visiting ex-
perts‟ analyses and sharing of lean produc-
tion cases. Discussion conclusions were ulti-
mately refined into draft plans for future
actions throughout the Division.
NEWSLINE
Advances Newsletter, October, 2013
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The Aurora “1 kWh per Night”
Air Conditioner Debuts at Canton Fair By Crystal Lun
M idea always makes a strong showing at the twice-
yearly Canton Fair. This instance was no exception, as the RAC
division of Midea presented their newly announced export mar-
ket air conditioner, the Aurora, which boasts the much talked
about “1 kWh per Night” energy conservation technology, also
known as ECO Tech. Given the remarkable efficiency of this
technology, the exhibit for this product attracted an unsurpris-
ingly strong amount of attention.
Aurora realizes its headline-grabbing “1 kWh per night”
through activation of the “Eco-mode” on the remote control.
This efficiency is achieved through the combination of its 3D
DC Inverter and 0.1Hz precision control, giving consumers an 8
hour typical sleeping period while expending only about 1kWh.
Last year, ECO Tech was reviewed by a panel of national
industry experts led by Professor Tao Wenquan, a senior acade-
mician from the Chinese Academy of Sciences, who stated the
panel‟s consensus that ECO Tech represented a leading world-
wide technology, innovative and unique, with outstanding per-
formance in energy efficiency.
NEWSLINE
RAC R&D Intellectual Property Seminar
By Crystal Lun
T o thoroughly implement and
execute Midea‟s intellectual property (IP)
strategy, RAC organized a seminar for
R&D managers.
The seminar started with a briefing
of the patent management work
throughout 2013 by the Patent Admin-
istration Department, followed by a
presentation in further detail of risk con-
trols and patents in development, ending with future plans and
prospects.
By the end of 2013, patent applications
will number over 1,000 for the first time
ever. A final important topic raised in
the seminar was how to build a compet-
itive IP management system within the
next two years, in order to be keep pace
with and surpass competitors.
Advances Newsletter, October, 2013
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RAC Rewards Excellence in its Sales Force
By Crystal Lun
A company‟s sales team is what ultimately gets its
product or service into the hands of customers, and Midea RAC
appreciates this fact. Last month, the division organized an
awards ceremony to recognize the top performing salespeople
and guides in China. The top 100 salespeople from across 42
regional sales companies in China gathered at Midea headquar-
ters to receive an award from RAC, in gratitude for their hard
work.
During the ceremony, prizes worth over 600,000 RMB
were awarded to the honorees, with the National Top 10
Guides and Salespeople earning 10,000 RMB each, and an iPad
Mini thrown in as a bonus.
Shopping guides serve to guide the consumer‟s purchasing
behavior, and also to enhance Midea‟s image at the point of
sale. Performance is nurtured through a team of terminal sales
trainers, who are selected from the top salespeople. These train-
ers conduct a series of training programs to help the guides and
salespeople to master their product knowledge and sales skills.
NEWSLINE
Midea RAC National Holiday Sales Up 80%
Over Last Year By Crystal Lun
C hina‟s National Holiday, also known as the Golden
Week, brings not only a much deserved rest for many people in
the country, but also a chance for many of those people to head
out shopping. For this reason, it is a favorite time for merchants
to launch sales promotions. Such promotions will be used to
clear remaining stock of current generation products, as well as
to increase exposure for next-generation goods.
During the Golden Week, Midea was pleased to find that
its air conditioners were highly popular, with sales during the
week rising 80% over those of the Golden Week in the previous
year. Impressively, the bulk of the performance was represented
by Midea‟s ECO Tech split units, accounting for 60% of the
total AC sales in China during that week.
Point
of sale
“shopping
guides” re-
port that
Midea‟s
1kWh ECO
Tech splits
have been
selling very
well, and that many customers actually return soon after initial
purchases to make additional purchases, based on their immedi-
ate experiences. The feedback from customers is that seem able
to perceive the increase in efficiency over other models.
Advances Newsletter, October, 2013
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Midea Wins 2013 China Industrial Design
Innovation Award By Blinda Li
I n last month‟s issue, Midea RAC had reported two key
wins at the CHEARI (China Household Electric Appliance Re-
search Institute) Awards Ceremony during the IFA show in Ber-
lin last month. Now Midea Laundry is joining the celebration,
with reports about two wins of their own from the CHEARI
Awards Ceremony.
Each
product cate-
gory is consid-
ered for five
different
awards: Prod-
uct Innova-
tion, Technical
Innovation,
Industrial De-
sign Innova-
tion, Enter-
prise Standard
Innovation,
and Branding.
As mentioned last month, RAC walked away with Product Inno-
vation and Industrial Design Innovation awards for its 1kWh/
night pioneer unit and KH floor standing unit, respectively. For
its part, Laundry scooped the awards for Technical Innovation
and Enterprise Standard Innovation, for the division‟s advances
with iAdd technolo-
gy, and “Technical
Specifications for
Speed Reduction
Clutches of House-
hold Washing Ma-
chines”, respective-
ly. These awards are
not Laundry‟s first,
either. Last year,
Laundry Division
won CHEARI‟s
Enterprise Standard
Innovation award
for its Heat Pump Dryer specification.
Midea‟s new iAdd front-loader model boasts an aesthetic
that leaves people with a sense of style and modernity, due to its
full, curving figure of two-tone steel plating, and a large, wel-
coming LCD interface. Beyond its good looks, the iAdd tech is
the real draw to this washer, capable of automatically judging
the exact amount of detergent and softener based on the load
weight and
amount of
water being
used, intelli-
gently making
adjustments to
drum RPMs
and water level
so as to quietly
save as much
water and
electricity as
possible, with-
out impacting
the quality of
the washing process.
The speed reduction clutch is an important component of
any household washing machine, but lacks standardized specifi-
cations. After much study and analysis, Midea‟s Laundry Divi-
sion developed its “Technical Specifications for Speed Reduc-
tion Clutches of Household Washing Machines”. This standard
details the design for speed reduction clutches for impeller-type
washing machines specified in “Household and Similar Electri-
cal Washing Machines” (GB/T4288), thereby filling the previ-
ous standards gap for this washing machine component.
This specification benefits appliance and component man-
ufacturers alike, by facilitating greater cooperation between
them, and allowing for more efficient and cost-effective mainte-
nance.
NEWSLINE
Advances Newsletter, October, 2013
8
Climate Solutions for a Green Environment,
in Pakistan & Sri Lanka By Peck Zhao
D uring the first half of October, CAC held two
seminars to highlight the importance they place on designs
which promote environmental friendliness. The first was in
Islamabad, Pakistan, and the other in Colombo, Sri Lanka,
both with the aim of promoting the V4 Plus, in collabora-
tion with local distributors. The name of both seminars
was, “Climate Solutions for a Green Environment.”
Midea CAC is breaking new ground in “green” ener-
gy efficient solutions for the HVAC industry in Pakistan
and Sri Lanka, where the first solar-powered AC systems have
been launched by Midea CAC and its distributors. At the semi-
nars, the audience was briefed about the significance of these
models in their markets, as they offer up to 80 percent savings in
energy consumption, as well as the benefits of solar-powered
AC and VRF systems and the new “falling film” centrifugal
chiller, in terms of reliability
and comfort.
“The energy has become
the real power in our world
which is led by those who
come up with the most
innovative, efficient and
sustainable energy solu-
tions,” remarked Dennis
Lee, CAC Sales Director
for Africa & South Asia.
“Green energy is all about
innovation, efficiency and above all the sustainability
like meeting the needs of today and sustaining our
resources for tomorrow.”
Attendance at the seminars amounted to 260 (120 in
Pakistan, and 140 in Sri Lanka) consultants, contrac-
tors, construction developers, and building owners, as
well as representatives from major media outlets.
NEWSLINE
Advances Newsletter, October, 2013
9
CMI Organises its First Midea Achievers
Meet in Thailand By Himani Joshi
C arrier Midea India recently organized its first Midea
Achievers convention for its Indian channel partners in Thai-
land, from August 4th to 7th. The event saw participation from
over 250 Midea channel partners across India. Representing
CMI at the event were senior officials such as Managing Direc-
tor Krishan Sachdev. This meeting was arranged as an oppor-
tunity to keep CMI‟s dealers informed about the company‟s
recent developments and future plans, and also marked the first
occasion that the entire CMI extended family could be together
to celebrate a new season of business.
Also in attendance was Sanjay Mahajan, Vice President of
Sales & Marketing at CMI, who remarked, “India is a competi-
tive market, and we aim to become the most preferred home
appliance brand in the years to come. I am delighted to see the
dedication, enthusiasm and effort put in by our channel partners
for the launch of the brand in India. I am confident that with
our understanding of the Indian market and our ability to ad-
dress customer needs through innovative solutions, we will be
able to carve out a niche in the consumer durable market.”
Almost simultaneously, another convention was being
held in Thailand between August 6th and 9th, attended by 17
Midea commercial air conditioning channel partners, with the
purpose to analyze the commercial market in India, understand
opportunities for Midea, and fine-tune strategies accordingly. It
was also an opportunity to recognize group and individual ef-
forts towards brand establishment in the commercial sector.
The Midea brand in India was first launched in December
of 2012, and since then, CMI has been expanding the brand‟s
footprint there. Both of these gatherings serve to help channel
partners to understand the Midea brand better, become familiar
with each other, and share their experiences.
NEWSLINE
Midea CAC Won the Trading Center Project
in South China City By Angie Cai
W ith the accelerating pace of urbanization, the
Heyuan Industrial Park, in Heyuan, Guangdong, decided to
begin planning a project for a massive new trading center, and
such a project naturally requires
a powerful solution for keeping
occupants comfortable during
the sweltering summers in
Guangdong. Amidst fierce com-
petition from several bidders,
Midea CAC ultimately won the
contract to provide the trading
center with all of its cooling
needs, with a value of over 12
million RMB.
The overall construction area will total around 1.8 million
square meters, making full use of Heyuan‟s advantageous loca-
tion adjacent to Jiangxi and central China in general. This will
hopefully make the new trading center a primary destination for
trading, exhibitions, and logistics planning.
The product which secured the contract for CAC is the
best-selling all-DC inverter V4 Plus VRF product. The V4 Plus
is the result of Midea‟s dedica-
tion to research and develop-
ment; it operates a team of elite
R&D staff worldwide, in a se-
ries of labs with CNAS Nation-
al Accreditation. This year
alone, Midea CAC invested 7
million RMB to set up a large-
scale lab for simulating severe
environmental conditions. CAC
also maintains facilities to carry
out customer comfort appraisal in regards to air power and
noise level.
Advances Newsletter, October, 2013
10
Midea’s Next-Gen Heat Recovery DC
Inverter VRF By Amber Liu
R esearch data shows that HVAC systems account for
approximately 15% of all energy expended in commercial set-
tings. The world faces an increasingly severe emissions problem
and industry watchers are increasingly calling out for HVAC
manufactures to do more to reduce energy consumption in their
HVAC products.
The industry‟s answer to this call is the variable refrigerant
flow type air conditioner, or VRF. VRF is a relatively young star
amongst the older conventions for commercial cooling. The
VRF market has continuously expanded since its introduction in
1982, even throughout the different economic crises that have
occurred since then.
Midea started its own VRF product line in 1999, and re-
leased its latest generation just recently, a heat recovery all-DC
inverter VRF named the V4 Plus, with a system that can always
operate at the most efficient frequency range; the SCHE
(simultaneous cooling and heating efficiency, 50% heating/50%
cooling) of this new product can be in the range of 7+ (W/W).
Heat recovery operation can be useful, particularly in tran-
sition seasons, and is relevant in all seasons if a building has dif-
ferent zone load profiles such as interior room loads and exteri-
or room loads. Heat recovery operation can also be applied to
buildings with an east/west or north/south orientation.
The Midea V4 Plus heat recovery VRF integrates many of
the most advanced technologies, with the industry‟s highest effi-
ciency DC inverter compressors, and 180°Sine-wave electric
control. The V4 Plus series is available in 5 models, with capaci-
ties ranging from 8-16hp, and in combination, up to 64hp. Its
unique split-coil design in the outdoor unit, with only a half coil
required at a time, allows the system to maintain a strong heat-
ing operation, even during defrosting. High pressure balancing
technology between modules, active when the system‟s heating
requirement is less than the master ODU‟s full capacity output,
means gas velocity
and pressure from
master ODU is
strong enough to
change the direc-
tion of the slave
ODU‟s four-way
valve ,which
makes the entire
system more relia-
ble, with lower
power consump-
tion. Together
with the IMM
(Intelligent Manag-
er of Midea), a maximum of 1,024 IDUs and 512 ODUs can be
controlled and managed by the IMM software, through LAN or
WAN. Due to recent improvements in user friendliness, flexible
design, lower operating noise and easy transportation, there has
been a sharp increase in interest and confidence with VRF
products among customers.
The new V4 Plus series has already been launched across
Europe, Latin America, South Africa, and will soon be intro-
duced in other areas where commercial demand for energy effi-
ciency becomes apparent.
NEWSLINE
Advances Newsletter, October, 2013
11
Midea Group Lists on the Shenzhen
Stock Exchange By Matthew Smith
C apping a process that began a little over a year ago,
Midea Group finally debuted on the Shenzhen Stock Exchange
(SZSE) on September 18th, becoming a fully public company.
Prior to this, Midea Group was privately-held, structured
with its most significant companies as subsidiaries directly un-
derneath it, the most nota-
ble of those being the
SZSE-listed GD Midea,
which was responsible for
the Group‟s core business
of designing and manufac-
turing air conditioners, as
well as refrigerators and
laundry appliances.
Back in August of
2012, Midea Group an-
nounced the beginning of a
major restructuring of the
company, wherein three of
the aforementioned com-
panies would be merged
into their parent. The
fourth, Midea‟s real estate
development arm, would
become a separate compa-
ny outside of the Group.
At that time, trading of
GD Midea shares on the
SZSE was suspended tem-
porarily for the following 7
months, in order to pre-
pare for the listing arrange-
ments and announcement.
GD Midea was finally del-
isted after August 14th, 2013, its final day of trading. Midea
Group was listed in its place the next day, using the final closing
price of GD Midea as a static placeholder, until official trading
began last month, at an initial offering price of 44.56 RMB per
share.
The listing of Midea Group, under the code of “000333”,
consisted of 1.686 billion shares outstanding, with 686 million
of those shares being tradable. One part of the listing process
for Midea Group was acquiring GD Midea shares not already
owned by the Group, by way of a share-for-share purchase,
incentivized with a premium of approximately 62% over the
GD Midea‟s share price
benchmark (9.46 RMB,
chosen at the announce-
ment in March), equivalent
to 15.36 RMB per GD
Midea share, or 1 Midea
Group share per 2.90
shares of GD Midea. Al-
ternatively, a cash offer
was worth 9.99 RMB per
share, but this option was
not exercised by any GD
Midea shareholders. (The
original offer was 15.96
RMB, but it was decided to
issue a 0.6/share dividend
afterward.)
The new Midea Group
listing comes in the form
of „A-shares‟, meaning they
are generally only available
to Chinese citizens, and
denominated in RMB.
(This is opposed to B-
shares, which are denomi-
nated in foreign currencies,
and are open to foreign
investment.)
With the merging and list-
ing now behind it, Midea Group moves forward from this point
as a much more visible and transparent company, fostering a
new level of trust with its investors and customers all over the
world.
NEWSLINE
Advances Newsletter, October, 2013
12
Smart Phones, Smart Appliances
By Crystal Lun
F rom Air conditioners have become necessities in our
daily life. With the development of the technology in this indus-
try, appearances have become more attractive, and functions
have become easier and more powerful. One thing that hasn‟t
changed much so far is the remote controller of the air condi-
tioner, which has lagged behind the advances of other aspects.
Anyone will feel annoyed when the heat becomes unbearable,
and they suddenly cannot find the remote to activate the air
conditioner, or when the remote‟s batteries have expired.
Fortunately, this kind of scenario may be forever in the
past, as Midea released its newest marvel this month: a
smartphone-air conditioner connectivity application, to comple-
ment the existing remote control.
The software, developed by Midea, is designed to offer a
similar interface as the conventional controller, and to com-
municate with the air conditioner through the same infrared (IR)
port as a conventional remote. The application can also com-
municate through Wi-Fi on Midea‟s more advanced models.
Starting in October, customers within China can download the
application through the website or QR codes displayed at stores
throughout the country, and it‟s completely free for everyone to
use. (The overseas version is currently in production, and is
slated for release in 2014.)
"The app was developed by our division, giving users con-
trol of all Midea RAC products in the China market, and even
some of Midea‟s commercial units. Smartphones with infrared
modules have become a trend, and as long as there is an IR
module in the smart phone, it can control many Midea units,”
Midea RAC President Wu Wenxin remarked. “Smartphone
control effectively solves the one problem that remote controls
are not universal between all models, and I believe that
smartphones
will fully
replace the
traditional
remote con-
trol in the
future. No
missing con-
trollers, no
buying se-
cond con-
trollers. Ad-
ditionally, if
applied uni-
versally
throughout
the country,
thousands of
batteries will
be saved,
making a
great contribution to environmental protection.”
Midea Group has one of the most comprehensive white
goods portfolios in the world, and so there is a great prospect
for smartphone remote control abilities across the entire range
of appliances that the company makes; air conditioners are cer-
tainly only the beginning.
FEATURE
Advances Newsletter, October, 2013
13
A Controlling Type of Guy
By Mandy Wang & Matthew Smith
Gonzalo Ruiz
MID, Department of Finance
This month, we sit down with a new addition to the
headquarters here in China, Gonzalo Ruiz. Gonzalo was
formerly with Midea-Carrier in the ABC head office in
Canoas, Brazil. Because of his expertise and international
working experience, Midea felt he would be a perfect fit in
the headquarters to lead the company’s push for better
financial controls. This is a fairly important topic now that
the company is fully public, so we wanted to hear about it
straight from him.
ADV: Thanks for taking the time to talk to us about your move here. First of all, can you explain your history with the company, specifically, how you started with Carrier/Springer in Brazil? Gonzalo: Well, in 2007, I joined Carrier as the Controller for the Latin American region at the headquarters in Brazil. At that time, I was working with Price Waterhouse when the opportunity came through. Carrier was looking for a Regional Controller that had experience in financial reporting, auditing, and internal controls in one of the “big four”, as well as the working experience in the United States, Brazil and Argentina. As it turned out, my background matched exactly with their needs. Also, at that time, I was willing to move from a consulting position to a more hands-on operational business in the finance department. ADV: So that was where it all started. Gonzalo: Yes, so when Midea came on board, and the JV was created in 2011, at first, I almost saw it as a threat, but then I realized that this could be a great opportunity! So I started working very closely with the TID (now MID) team, supporting them on financial reporting, and we created a great business relationship. When the current opportunity came up, Jessica, Kaiser and I discussed the idea of coming over to join MID, and we concluded that this would be a good move for everyone. ADV: So go into more detail about your specific job here – it was important enough that they uprooted you all the way over in South America, and moved you in on the other side of the
planet here. Nobody else here could do it; they obviously thought, “We need this guy, here.” Gonzalo: Well, I think that when Midea started to globalize, especially with the JVs, they realized that they had to enhance their financial reporting process and implement strong internal control processes. Internal control processes will provide you assurance that all numbers flowing from entities around the world will be accurate and complete. ADV: They didn‟t have this system here? Gonzalo: Well, the numbers were being compiled, figures tallied up manually, but this isn‟t enough. You need to ensure that those numbers have gone through a control process; proper procedures and approvals. You need to visit the subsidiary, understand how they do business, assess their risks, and test the numbers, so that you can rely on them. Anyone can send you any number, and you can inquire by phone for the „why‟ about the „what‟, but if you don‟t go down and try to implement the control procedures, it‟s going to be very difficult, just by phone, to catch or raise an issue, unless you‟re a giant. Nowadays, all around the world, many companies are heavily system-driven, so you need to be very careful with how they are built, with authorization changes, processes, because if something goes wrong, then you will never know. Nobody will know.
PEOPLE
Advances Newsletter, October, 2013
14
A Controlling Type of Guy (cont.)
By Mandy Wang & Matthew Smith
ADV: Yes, that is to say, once the system is built, people simply follow the system. If there are any holes, most people tend to not question it, because it‟s the system they‟ve been given to follow. Gonzalo: Yes, so you see a lot of companies investing heavily in good systems and implementing them, because it‟s impossible otherwise. You cannot test everything nowadays, with hundreds and hundreds of transactions going on, and in different currencies. It is impossible to test everything, so you
need to rely on a system, but only if you test the systems themselves. Nothing is ever perfect, issues will be raised, and fixed, and then you can rely on the numbers coming through. The team here, I think they are very good in finance, although maybe not from a control perspective; they need support, guidance. These internal control processes are more… western-created; essentially from the United States. ADV: Where you had already worked for some years. Gonzalo: Since the accounting scandals of 2001, with Arthur Andersen and companies like Enron and Worldcom, the world of business was shaken, and along came Sarbanes-Oxley. But, internal controls are not new- I mean, they‟ve been around for decades. But these controls begin to slip, and people become accustomed to that, because „It‟s not important; we‟re making money. What‟s the problem?‟ … until the numbers begin to turn bad, and then you realize, the revenues weren‟t actually those revenues, net income was not actually that net income, and then it becomes ugly.
ADV: So it can either be a case of controls not being present, or like with those recent scandals a decade ago, not being followed. Gonzalo: Yes, and so in Midea, I think this is where I can help the business. This is not a short-term process, it‟s actually quite long-term. In MID now, we‟re creating a team, and our goal is to implement proper controls in all the entities in the appropriate proportions. Internal controls are different between, say, in Vietnam with two factories or ABC with three factories, compared to Thailand, which is a much smaller business.
ADV: Over this past week, you‟ve had the company of colleagues from your old neighborhood – one from the office in Canoas, Brazil (Alex Lengler, interviewed by ADVANCES back in May!) and Martin Menendez from Buenos Aires, Argentina. What have the three of you been working on? Gonzalo: Well, we‟re now in the process of implementing Oracle HFM (Hyperion Financial Management) consolidation and reporting systems. At the moment, Midea MID has no single reporting system, and for the most part the reporting is done manually. This is extremely risky; there‟s no tracking, no log; numbers can change. You need to have a secure and universally-used reporting system that will provide accuracy, completeness, and will expedite the process. So each entity should, by 2014, be able to load the information from their local ERP system, into the HFM system. Once it‟s there, Midea Group could have these numbers available in the 2nd week of the month. Right now, this is taking much longer. With HFM, you‟ve got data coming from many different sources around the world, but within a single, standard format, same language, same accounting rules, and you can trace any number‟s modification
PEOPLE
Advances Newsletter, October, 2013
15
A Controlling Type of Guy (cont.)
By Mandy Wang & Matthew Smith
and/or origin. But this needs to be implemented first, and it‟s not the easiest tool to learn, but once it‟s in place and everyone is using it, it‟s great. I used to use it at Carrier, and it‟s great.
ADV: So this is the challenge now: putting it in place, and getting everyone over the learning curve. Gonzalo: Brazil, well, ABC (Argentina, Brazil, Chile) is the first to implement this, because it‟s the major one of the JVs, and then there‟s a schedule for the others to follow. That‟s why Alex and Martin came over from ABC to work on this, because they‟re already familiar with the Carrier HFM system, and can
help in applying it company-wide. ADV: On a lighter topic: You‟re living in China now. But you‟ve lived in a number of other places before: You grew up in Argentina, but you also lived in both United States and then Brazil. It seems that each of these is an ever-greater leap, in terms o f a d j u s t m e n t , perhaps?
Gonzalo: Yes, of course, in any country. You might think that Brazil would be easy for someone from Argentina just because
of the proximity, but between those two places, there‟s a lot of adjustment. The ease I had with it was that I was able to pick up Portuguese fairly quickly, and living in the United States was
actually easier for me in some ways, partly because I already knew English. In China… it‟s complicated. The language, and in a more general sense, overall communication, are more difficult to grasp. This will no doubt be the most challenging of my international living experiences. But it‟s pretty marvelous here, and I can say that trying to understand China from simply reading about it or watching something about it on television is just no substitute for actually being here. ADV: I agree with you completely. There‟s no way you‟d have any idea about it without being here first. Gonzalo: In many ways, it‟s much more developed than I originally imagined before ever coming here. One other interesting thing I can tell you – the first bit of Chinese I learned to speak here, was not xie xie or ni hao, but bing shui – ice water. I‟ve learned that it‟s very unusual for anyone here to drink ice water, even in the summer, and so this is something I had to learn to ask for specifically. But it‟s working… so I think this is a good start to my new life here.
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Yīgè bīng shuǐ, xièxiè!
Advances Newsletter, October, 2013
16
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