EHC Global elevates its game in China
For most of us, escalator handrails and elevator mechanisms are so commonplace, it’s easy to forget about them.To veteran Canadian entrepreneur Ronald Ball, lift equipment and components are big business. “Somebody’s got to make them,” says Ball, at one of his manufacturing facilities near Shanghai.
His company, Ontario-based EHC Global, supplies some 40 per cent of the global market for escalator handrails. And about 60 per cent of the company’s total production is in China, with approximately half of that exported internationally.
After leaving his job with industrial rubber products maker Goodyear in 1977, Ball started his handrail manufacturing and export company in Oshawa with one employee.
After penetrating the United States and establishing a presence in Singapore and Korea in the early ‘80s, Ball set his sights on Europe. It was a good move, and offers a tried and true lesson for companies eyeing growth, to do so by integrating themselves into the supply chains of larger firms.
“In those days, Europe was the centre of the lift industry. So we set up a manufacturing plant in Germany. We’re still there.
“Gradually, the German lift manufacturers we supply—like Otis and Schindler—went to Asia. They had to have handrails, so we followed them. It was simply a matter of continuing to service our well-established customers.”
Today, Ball says about 75 per cent of the world’s elevators and escalators are produced in China. “Had we not come here, we probably wouldn’t have survived.”
Just being close to his customers, however, didn’t guarantee success.
In 1997, the Asian financial crisis struck. Ball, then in his mid-50s, personally relocated to Shanghai to save EHC. “I wasn’t going to let this thing sink the ship.”
Under Ball’s leadership in Asia, EHC flourished, growing from a $20 million enterprise into one with $50 million in sales annually.
On Track For Growth
A relentless focus on product quality and innovation has helped EHC maintain its market leadership and growth.
Among the company’s latest products are antimicrobial handrails that it now sells to Seoul, Korea’s Incheon International Airport. “We hope to offer this product to China’s mass transit operations and high-class commercial buildings,” says Ball.
EHC has also started selling sleek, thermoplastic polyurethane handrails that can be made in any colour and printed with advertiser or safety messages.
Products like these are helping EHC’s core handrail business grow 12 to 15 per cent annually.
EHC now also manufactures durable thermoplastic polyurethane rollers for escalators and elevators, which are growing 25 per cent a year.
“There are 10 times as many elevators as escalators, so serving elevators has broadened our market,” he adds.
EHC is putting its expertise to work in new ways too, including engineering custom products for its clients. Among them, EHC invented a durable flat lift belt, made from steel cable-reinforced polyurethane for a global elevator company.
“Our client is so impressed with our ability to design and develop, they want us to set up manufacturing plants in Europe and North America. It has the potential to double our business.”
Despite such success, EHC faces tough competition in China.
Although the price of its handrails is lower now than when EHC started, Ball says competitors are rising. “They’re 30 per cent cheaper than us in price. They don’t have our quality or technical development skills, but they operate on a Chinese shoestring, which is pretty skinny.”
To keep ahead of the pack and fund its growth, EHC also needs working capital, another challenge in China. “For this new flat belt venture alone we spent $1.5 million of our own money setting up the equipment.
Overcoming Financial Constraints
Ball says banking in China is heavily controlled and generally not easy, especially for foreign entities. “Foreign banks really struggle here too, because they’re so restricted.”
Denis L’Heureux, EDC Chief Representative, Greater China, says among its initiatives, EDC is working on a deal with local banks in China to help bring Canadian companies “stable and increased access to working capital.”
Beyond China, EHC has used EDC’s accounts receivable insurance for more than 20 years to export to many parts of the world.
“Our bankers in Canada recognize the insured receivables as collateral, which can get us 10 per cent more working capital. Leveraging these assets has been important to our export success.”
Protecting Intellectual Property
While most of EHC’s R&D remains in Canada—where the company can readily access skilled engineers, tap Canadian R&D tax incentives and worry less about intellectual property (IP) risks—manufacturing in Asia has meant moving certain aspects of the company’s sensitive technology to China.
“Since deciding to bring our thermoplastic polyurethane products and manufacturing process to China, we have been very careful,” says EHC founder Ronald Ball.
To protect EHC’s IP, Ball has implemented various measures, including:
- Selective trust: Only employees with a minimum of five years with the company may work with the new processes and systems.
- Restricted access: Only six of EHC’s Shanghai employees have access to the new manufacturing facility’s core technology. When visitors tour EHC’s new plant, curtains are placed around sensitive equipment.
- Mystery materials: Raw materials are sent to another warehouse where manufacturers’ labels, brands and other details are stripped from packaging before it is sent to EHC’s new facility.
- One part at a time: When EHC implements new machinery, components are procured from various suppliers and later assembled on site. “None of our suppliers see the whole unit.”