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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

The idea of selling Chinese cranes in U.S. ports began 11 years ago around a bridge table in the East Bay hills, said Frank Wan, a former Chinese crane engineer and UC Berkeley business student. He was discussing maritime affairs with attorney Thomas Berkley, a former president of the Oakland port commission and a nationally known maritime figure.

"I said I was thinking we could work together to sell some cranes," recounted Wan, who served as a ZPMC consultant in several ports. "And he said it was a pretty good idea."

The next morning, Wan met Berkley at his building in downtown Oakland and was handed a key to his own office. Then he called a relative who was a government official in Shanghai. "I told him an American, Mr. Berkley, was willing to help us sell cranes in the U.S. market," Wan said. "And he said ... we need a sales plan."

By 1993, Berkley and Wan had helped sell two Chinese cranes to the Port of Vancouver and Wan's relative had become president of the fledgling company known as ZPMC. The majority of its stock was held by government-controlled China Harbor Engineering Co. and two wholly owned subsidiaries--one an engineering company, the other a century-old port machinery plant in Shanghai.

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Miami: A First Foothold

ZPMC did not land its first U.S. sale until it teamed up with Calvin Grigsby, a nationally known investment banker and major Democratic Party donor.

It was a natural match: Grigsby had worked for Berkley years earlier during law school and considered him a role model as a successful African American attorney.

Grigsby also had strong ties to Miami-Dade County's Port of Miami. He arranged port bond financing through his San Francisco company, Fiscal Funding, and ran the port's crane operations through a subsidiary, Fiscal Operations.

He figured out that cranes could be fabricated almost anywhere labor was cheap. So when the port wanted to buy more cranes, Grigsby saw an opportunity. "I felt I could find somebody [to build the cranes] and bid it myself," he said in an interview.

Grigsby said he worked on deals with ZPMC and its parent company while accompanying Commerce Secretary Ron Brown on a 1994 trade mission to China.

During bidding in Miami, records show, Grigsby listed himself and others who managed the port's crane operations as lobbyists for a ZPMC/Fiscal Funding joint venture. The dual role, Grigsby recalled, wasn't a problem because "There's no such concept as conflict if you're a private party."

The Grigsby-led team prevailed with a low price of $24.7 million for four cranes.

"We have our friends who are helping us," Liu Qi Zhong, ZPMC's deputy general manager, said by phone from Shanghai. "But basically we won [contracts] through international bidding. We did not win a single contract by political effect."

After ZPMC won the contract, the port's project engineer, Blaise Lionelli, went to Shanghai to check out ZPMC facilities along the Yangtze River. The consultant found the engineering reassuring, but in a February 1994 report he described the erection site as "cluttered" and likened the pace to a "fire drill."

The delivery of the first two cranes in 1995 did not inspire confidence. A mishap in the Panama Canal caused salt water damage, forcing ZPMC to replace 20 electric motors.

Acrimonious disputes erupted that year.

Kocks Crane & Marine Co., a competitor, filed a federal lawsuit in Pittsburgh, alleging that the ZPMC cranes were copies of six Kocks cranes previously built for the port.

The complaint, later dismissed because the judge ruled it was filed in the wrong jurisdiction, included parts of a deposition by Lionelli. He alleged that the ZPMC project manager told him that Fiscal Operations had provided drawings to ZPMC and that Wan had taken them to China.

ZPMC officials denied stealing the plans and said their cranes look like Kocks' because that's what the port specifications demanded.

Wan denied taking or transporting any Kocks plans. "I did take five or six engineers to the Port of Miami, and we got on the cranes and took pictures and a lot of measurements," he said in an interview. "We did copy the Kocks design" and improved on it.

In December 1995, Lionelli told port officials that the ZPMC cranes had unapproved welds, instead of bolts, on a critical boom support and that it could be dangerous.

A port consultant concluded that the problem could reduce the cranes' life expectancy by 40%, but ZPMC and a Shanghai university study said the cranes were sound.

Another problem surfaced in a February 1996 accident that caused more than $150,000 in damage to one crane. While the operator was lifting a container, the load tipped sharply and fell to the ground. Consultants for the port and ZPMC said the probable cause was a control system supplied by a ZPMC subcontractor, who rejected that explanation.

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