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Cranes Lift Upstart Above Competition

Machinery: By bidding low and building alliances, a Chinese company has secured major contracts in American ports.

January 27, 2002|TIM REITERMAN | TIMES STAFF WRITER

SAN FRANCISCO — Beneath autumn skies, a freighter carrying four of the world's largest container-cargo cranes glided into San Francisco Bay, squeezing under the Golden Gate Bridge en route to the docks of Oakland.

That day in the fall of 2000 was a spectacular, but not singular, triumph for an upstart Chinese company that dominates manufacturing of the most important piece of maritime machinery other than ships.

Just two months earlier, the Shanghai Zhenhua Port Machinery Co., known in the industry as ZPMC, had secured a contract to provide as many as 20 similar cranes to Long Beach for $143.5 million--the port's biggest pact ever.

ZPMC's ascendancy is remarkable, but the politically astute company has left a wake of disputes from coast to coast, including labor strife, litigation and claims of defects in the cranes.

The story of ZPMC's rise illustrates the gathering, and at times controversial, economic might of China, as it dominates new sectors of global commerce. It also speaks to the intense worldwide competition among ports that buy $1 billion in bigger and faster cranes each year to help draw container-cargo trade in everything from auto parts to athletic shoes.

After being launched in 1992, ZPMC took just six years to become the leading maker of ship-to-shore cranes, and the company has remained at or near the top.

In U.S. ports, where the company sold dozens of towering gantry cranes for $5 million to $7 million, the formula for success was simple: Bid low and build alliances.

Using Chinese labor and its own fleet of delivery ships to cut costs, ZPMC consistently underbid the competition by hundreds of thousands of dollars or more to sell machines that look like giant erector sets and hoist tons like toys.

To gain entree to the American maritime fraternity and navigate arcane bidding processes, ZPMC hired former port officials from Long Beach and Vancouver, Canada, as sales consultants.

ZPMC forged particularly close ties to the publisher of an African American community newspaper in Oakland who once headed that city's port commission. And the company sold its first cranes in Miami by forming an unusual joint venture with the port's crane concessionaire.

But controversy accompanied the sales.

In Florida, a competitor accused ZPMC of stealing its design, and ZPMC's partner was indicted on unrelated corruption charges.

In California, unions accused the company of stealing American dock jobs and of unsafe labor practices such as wearing bamboo hard hats. And state safety officials fined ZPMC for safety violations after a young Chinese worker was killed in an accident.

In both states, ports have grappled with worrisome and time-consuming problems with the cranes, the most recent involving bent crane legs and foundations in Long Beach and Oakland.

ZPMC officials defend the quality of their cranes. And port officials who have invested millions of public dollars in ZPMC cranes tend to dismiss the problems. They praise the company's on-time delivery record and low prices that one port engineer said make them "look like heroes."

"They made a lot of crane manufacturers wonder why they are in the crane business," said Terry Smalley, head of the Port of Oakland's crane unit, noting that one ZPMC bid was $1 million less per crane, or almost 15% less than the closest competitor.

The modern crane is an engineering marvel--a bridge-like steel structure with powerful electric motors, hydraulic systems and computerized controls that allow operators to pluck dozens of containers an hour.

Ports around the world have been ordering ever-larger cranes to serve freighters that are too wide to navigate the Panama Canal. The new cranes can weigh 1,000 tons or more and lift the equivalent of several dozen luxury cars.

In selling more than 200 ship-to-shore cranes and 300 smaller rubber tire gantry cranes, ZPMC has become a recognized leader in an industry once ruled by U.S. companies and later by Europeans, Japanese and South Koreans.

Although operators say ZPMC cranes are fast and productive, some California mechanics say they have experienced problems with oil seals, welds, gear boxes and hydraulic systems, and sometimes have trouble getting spare parts. Even so, they say down time has not been out of the ordinary.

But the big question for many is how long the cranes will hold up.

"The question is how could a Johnny-come-lately crane manufacturer get the expertise and be selected," said a former ZPMC competitor, Bill Reynolds of Harbor Industrial Services Corp. in Long Beach. "The answer is they ... do not have the expertise. There are things about ZPMC cranes that already are showing premature signs of failure. [Cranes] should last 20 years, and many of us in the business think they won't last 10."

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