Chinese Greenfield Investment in Charlotte

How hard is it for a Chinese company to build a brand in the U.S.?

Positec, a 23-year-old Chinese company with its U.S. headquarters in Charlotte, says it takes time, local hires, and respect for American culture. The privately-held company says it has produced double-digit revenue growth for more than a decade. It also has faced challenges, including multi-million-dollar lawsuits brought by an American competitor.

Founded in the city of Suzhou in southeastern China in 1994, Positec houses customer support and sales operations at its offices in northeast Charlotte, where it employs more than 200.

If you go to Home Depot or Lowe’s, you might see Rockwell or Worx brands of cordless trimmers or portable blowers on the shelves. But you might not know the products are made by Positec, which established its Charlotte footprint in 2005.

“I don’t really see this company as a Chinese company,” Tom Duncan, the company’s U.S. branch president and CEO, said. “I really see it as a global company.”

“We are a challenger brand,” Duncan said. “If we did things the same as our competitors and they are much bigger, they are always going to win.”

Duncan said the company’s Charlotte-based engineers use “backyard conversations” to continuously innovate. The goal is to understand what customers need when they’re working in their backyards.

For example, he said some customers, many of them women, complain that gas cords are too heavy to lift for garden tools such as trimmers and blowers. So the company designed tools that are powered by electricity instead of gas so that customers can use the tools by simply pulling a trigger or pushing a button. The company has filed more than 4,600 patents worldwide and was named a top innovative vendor by Lowe’s.

“We want to better understand American customers’ minds than our American competitors,” said Don Gao, founder and CEO of Positec globally, who is based in Suzhou and listed as the 238th richest person in China by Forbes.

Legal Challenges

For Positec, the innovation strategy faced a snag when competitor Black & Decker accused it of copying its design and color scheme.

In 2015, a jury found that Positec’s Rockwell series of tools had unfairly utilized the iconic yellow and black color scheme used by Black & Decker’s DeWalt brand and that the company should pay Black & Decker $54 million. Post-trial motions continue in the case, which awaits a final ruling.

The history between Positec and Black & Decker, part of Connecticut-based Stanley Black & Decker, dated back to the 1990s when Gao’s factories were a contractor for the toolmaker giant. Now, the two companies’ factories are neighbors in China, located in Suzhou’s industrial district.

Gao disputes Black & Decker’s legal claims. “We are trying so hard to satisfy what the customers want and spending so much time in product design… Why on earth would we copy their color?” asked Gao.

In a separate case, Black & Decker accused Positec of copying its trimmer products’ motor mounting system. The case is still pending.

The prolonged lawsuits disappointed Gao. He said his company was discriminated against partly because many people have pre-existing negative perceptions of Chinese brands as intellectual property thieves.

Raymond Niro Jr., lead lawyer representing Black & Decker, called Gao’s comments “simply wrong” and Positec “an infringer,” adding: “One look at Positec’s infringing products shows that they clearly copy DeWalt’s yellow and black color scheme.”

Brian Love, a law professor at Santa Clara University, said intellectual property rights will become an increasingly vital issue for Chinese companies as that country’s manufacturing sector looks to move forward from one known for making products invented by others, to creating genuinely innovative ones.

“We are one of those unique Chinese companies that really is an innovator,” Duncan said, calling Black & Decker “a very upset competitor.”

“We are fighting not only for our reputation and Positec’s image in the marketplace but also for the reputation of Chinese companies in general,” he said.

Hire Locals

The legal wrangling is just one example of many challenges faced by companies that make “greenfield investments,” referring to those that build their operations in a foreign country from the ground up. Positec is one of the few Chinese companies that have made such investments in North Carolina.

These investments are sometimes considered more attractive because they can create new job opportunities and capital investments to stimulate local economic growth, said Christopher Chung, CEO of the Economic Development Partnership of North Carolina.

By contrast, many acquisitions by foreign companies are simply a reorganization of ownership without significantly adding jobs or investment, he added.

Though Chinese investments in North Carolina have totaled $4.8 billion since 2000, most of them are conducted through acquisitions. Since 2000, there have been 44 greenfield Chinese investments in the state, accounting for less than 6 percent of total value of Chinese investments, according to Rhodium Group, a global political risk research company.

Executives say Positec was attracted to Charlotte by its educated labor force and by the nearby headquarters of Lowe’s, one of the company’s largest retail partners.

Cultural differences can pose challenges for Chinese investors in the U.S., and that’s one reason why few of them build a brand from square one, said Zitian Chen, a business professor at UNC Charlotte. In China, for example, professionals like discussing work during dinner, but such habits can be troublesome for them in America where dinners are usually reserved for family time, he added.

Gao is aware of this, so he made a decision when the company established its presence in Charlotte: “When we arrived in the U.S., we wanted to respect America’s culture, and that’s why we do not send a single Chinese employee to our Charlotte office. We only hire locals.”

Positec, does not disclose its financials but says North America is the company’s biggest market.

Despite the legal challenges, Gao and Duncan are optimistic about the company’s future and have tentative blueprints to build manufacturing sites in the U.S. as labor costs in China increase by over 10 percent annually.

Positec has already opened a distribution center in Huntersville. And the company calls Charlotte its home.

“We have our roots here. As we grow, we grow with Charlotte,” Duncan said.

Chinese investments in the Carolinas

▪ In 2013, Shuanghui International Holdings bought meat processor Smithfield, which has major hog operations in Tar Heel, N.C.

▪ In 2014, Chinese technology giant Lenovo bought IBM’s X86 server business based in the Raleigh-Durham area.

▪ In 2015, Chinese textile manufacturer Keer built yarn lines in Indian Land, about 6 miles south of Ballantyne, adding more than 500 jobs.

▪ In 2015, China Orient Summit Capital financed a $122 million office tower under construction at 615 South College Street in Charlotte.

▪ In 2016, a group of Chinese investors pledged to invest $100 million to build a Chinese cultural village at the former Hard Rock theme park site in Myrtle Beach.

▪ In 2017, Volvo Car, acquired by Chinese auto maker Geely in 2010, said it plans to open a $500 million factory in Charleston, adding 2,000 workers initially.

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