Reprint from AVEB

Superior's Chinese Connection
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By Paul Bertorelli



Superior Airparts announced last week that it's being purchased and re-capitalized by a Chinese company. Key the kneejerk reaction: Good grief, are we shipping the entire country to China? In five years, will there be anything left?

I'll concede that this is my standard reaction whenever I'm told or read that a company has sold its assets to or has otherwise gotten in bed with the Chinese. On first blush, it always seems like such a sellout, a naked attempt to cash out and head for an early retirement. The reality is always more complicated than that and thus the initial emotional reaction soon gives way to the harsh reality of the modern business world.

And the harsh reality is that arguing against globalization at this scale—or any other scale, for that matter—is like arguing against gravity. You're far better served by adapting the business tide rather than attempting to shovel sand against it. Cessna realized that when it moved the Skycatcher to China and now Superior has had a similar revelation.

So inevitable or not, is this a good thing or a bad thing? It's a good thing, but with reservations. When Superior turned turtle last year, it occurred for reasons we may never know exactly but it's a safe bet that two them were the same financial mismanagement that upended Thielert (it has bought Superior) and the demand cliff represented by the onset of a deep recession in 2008.

The fact that Superior didn't immediately find a suitor suggests that in the current market, business isn't that great and also that there's just not that much Western capital looking for a home of any kind, much less one in the risky world of aviation. China has a trillion-plus dollar trade surplus with the rest of the world and is looking for a place to put some of that money. Through a chance set of circumstances, a Chinese company found Superior and the deal was done.

On the plus side, it could mean that Superior's Texas operation gets an infusion of capital to gin up its parts inventory and product expansion, which new CEO Tim Archer says he sees happening soon. That's likely to include some new cylinder projects which were put on hold by the recession and bankruptcy. That's a good thing, because engine shops need all the competitively priced parts they can get to stay in the game against increasingly aggressive marketing from Lycoming and Continental, not to mention other shops. The deal Archer made with the Chinese company evidently stratifies the market, so that Chinese made parts won't find their way into the U.S. but will be limited to the developing Asian market. More likely, at least initially, the reverse will be true. U.S.-made parts will trickle into the Asian market until Superior's Bejing factory ramps up.

The Chinese are just as desperate for creating manufacturing jobs as are U.S. companies so it's anyone's guess how long or even if this relationship will stand. By Western standards, the Chinese play a zero-sum business game and any company who has traded there has had to learn that the Chinese do things differently.

But short term, setting aside the understandable emotional reaction, the deal is good one and is almost certain to grow some jobs in Texas. In any case, it's better than the alternative, which was to have Superior continue to struggle and, perhaps, eventually wither.

Reply#1

China is the Wild West as far as adherence to regulations and quality goes. As for China’s phenomenal economic health goes, one must take their economic “Data” as truthful. Which I doubt it is. Be prepared for lots of recalls and AD’s.

GA runs on discretionary income, so anyone who has even been mildly paying attention and has thought about the current economic trends in our country for more than 30 seconds in a row, can see that discretionary income is quickly going by-by. Who cares where the parts are made, because in 5 years time GA will be a shell of its present state. Most of the GA community, (also a large swath of America for that mater) is in DEEP denial about what is going on outside GA and how it is going to affect GA in the long term.

I have to say that I am always amused when I read the GA aircraft manufactures drone on with rosy projections about how China or some other international market is really going to takeoff. Yea right, go run out and buy stock in those companies right now.

It doesn’t matter where these parts are made there will be little market left for them if something very radical doesn’t happen soon and turn things around for the middle class.

#2
What I'm afraid of is the same problem that happened to an acquaintance of ours who imported the Chinese tires. The US people specified how the tire was to be constructed to the letter (In thier case how the rubber was to be bonded to the steel belt) The Chinses company started to make the tires that way, but after a while someone in the company in China decided they didn't "feel like" doing it that way anymore, so they dropped that step. The result was tire delaminations, crashes, and deaths, with the American company held liable but no one in China could care less because they coulnd't be sued.

What happens to Superior cylinders if production moves to China and someone doesn't "feel like" making it the same way anymore? No one at the factory dies, but we do.

Will this happen to Superior? Who knows?

Do I want to be the first to find out? Nope.

I have a Superior engine so I watch these goings on with interest. From my experience they have a good quality product here but some resalers of airplanes with these engines are trying to use the Superior engined aircraft as a way to devalue the airplane. I think this is nonsence as just like anyother engine, the Superior engine is made up of parts and you can replace parts. Just because at the present time Superior is not making engines doesn't mean I'm going to trash my engine and go buy a Lycoming. The future of Superior will be determined by the market there is for their product, just as any other company. I hate to see what is happeining to GA because of bad press, high prices and over regulation. I do what I can to promote our kind of flying so otheres may do the same on later on.
HC

Put a superior enginge in my first 182B in june 2000. Took a partner shortly thereafter and the plane was flown regularly. Partner has plane now and it has over 1700 hrs on it with no work on the engine, regular oil changes, regular preheat when below 40 F. Compressons are up and oil analisis is excelent.

Great engine and I think it shoud be extra.

Tim

I've seen some Chinese manufactured stuff that was very impressive, and some American made stuff that was junk. The variables in manufacturing and engineering are too many and too complex to assume that a move to China would immediately signal a loss of quality.

In my opinion, it's the removal of the manufacturing process from being surrounded by engineers and technicians who know the industry and product well that causes problems. I know several engineers for American tech companies who travel to China, for weeks at a time, to babysit the move from the prototype to production, and that extreme over-controlling approach to hand-holding the manufacturer is the big thing that determines quality and consistency of the final product. You can't blame a wrench for stripping a bolt head.

Now, what it means for our economy is a different story, because it's certainly going to mean fewer in-house jobs. It might be the difference though between some of these aviation industry companies going under and staying alive.

Watch sources like the Wall Street Journal for info on China. Conventional wisdom is China has peaked and is starting downhill. They have major problems over there. The number published by China for their economic growth need to be taken with huge grains of salt.

Superior was in good financial shape when it joined with Thielert. The fading future of 100ll was the driving force that made the German diesel offer look appealing to Superior. Superior would have access to Thielert's diesel and Thielert would couple with to the worlds largest aftermarket parts suppliers for Lycoming and Continental. So what could go wrong with that? The price of Avgas alone in Europe was going to drive engine sales but then was there were engine problems with the Thielert and it did not land an OEM. Here in the US the cost to refit the engines into the aging fleet of single engine gas guzzlers was more than most of the planes were worth. Then there was the economy thing. Sales just weren't there so Thielert drifted onto the rocks and when their balance sheet got bad enough the banks not only tied up Thielert's credit, they also tied up the credit line that Superior depended on to operate. Had they not paired with Thielert they would have weathered it this far without bankruptcy. When Thielert filed bankruptcy it forced Superior to do the same and they had to refocus on the most profitable section of their business and get back to the basics that built the company but that meant shutting down the engine building line. As recent as two months ago they did hope to get the engine build line back up within two years . All this is from my contacts with the company when I needed some special crankshaft oil plugs that were not in stock but were over at the engine assembly plant. They are necessary to convert the Superior 0 360 from fixed pitch to constant speed prop, which I am doing. It was an interesting phone call with company people who were unaware at that time, or just not saying anything yet about the Bejing connection.

I hope that Superior will use the Chinese capital to get their legs back under them and when the economy gets back on track, get back into assembling their own engines again and continue doing all this in Texas. The Chinese meanwhile, could benefit by access to the design and rights to produce these parts in China and develop that market. Hopefully the US manufacturing will not be moved to China. Superior has a good product and I would be afraid it would be compromised if it is moved. I have several family members who are involved with 3M and CaseIH that have told horror stories of what goes on in Chinese manufacturing. Another time.

I have several family members who are involved with 3M and CaseIH that have told horror stories of what goes on in Chinese manufacturing. Another time.

Every time I see a new shipment of synthetic lysine for hog feed at the local elevator that came from China, I wonder what's really in those bags. On the other hand, how many bad crankshafts have been made in this country because somebody couldn't pour the right ratio of ingredients into the pot?

Thielert never had a chance with the requirements they slapped on the engines. Same goes for the Eclipse jet. Stupid rules they implemented doomed them. You cannot require various parts of an engine to be taken apart and shipped to Germany for inspection and/or replacement and think the US market will support that. And then when you get done paying for all that you have to buy a new engine when the TBR hits. It would probably cost three times the cost of a comparable piston engine to operate both to 2000 hours. That's simply not a feasible option unless you have no access to 100LL.

Bonanza Man wrote:Watch sources like the Wall Street Journal for info on China. Conventional wisdom is China has peaked and is starting downhill. They have major problems over there. The number published by China for their economic growth need to be taken with huge grains of salt.

Some of the Chinese are starting to demand higher wages, better working conditions, etc, so the corporations are now looking to other countries for their cheap labor and thus perpetuating the race to the bottom. I'm not blaming the corporations here, I'm blaming the insane rules and trade policies that allow this to happen.

We're rapidly becoming a country that doesn't make anything anymore, we now ship more raw materials out of this country than we produce in finished goods. Our companies and resources are increasingly being owned by foreign interests. Economically, we have achieved the definition of being a third world country.

Our national security is also at risk if we can't even make key components for our Defense system because it's now produced over seas.

We're bleeding jobs and the wealth of this nation. I wonder every day if my job will be next to go.

"Labour was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labour, that all wealth of the world was originally purchased. " - Adam Smith.

Woops, sorry, I though this thread had been thrown into "Hot air" already as I didn't see it on the main page not logged in. Let me know if I should delete my previous post.

Naw, China is not politics, It is business at its most primal level and its a different world than regulated competition.
I know people working in 3m who went there to help set up a factory and get it going. They were required to live in gated compounds and not allowed to drive, instead they were chauffeured around for shopping or work or anything. At first it was cool to watch the mobs of people in the street just part for the car and come back together when they passed, like they had eyes in the back of their heads. One day he found out why. Whump Wump. The car just ran over a bicycler who rode out from a side street in front of them. "Eyes ahead, hollered the driver, some one will see you. Bicycles should know better, to not ride in front of cars" No call for help was made and he just drove on.
Life is a cheap commodity when there is so much of it.

Another day they drove past preparations for the Olympics. Cement was being hand bucketed up by rope and pulleys and poured around steel beams for a tall building. Above them welders were hooking one leg around vertical beams and welding. No welding masks, in one hand was the welder and in the other they held a piece of cardboard with a hole in it, sort of like when you were in grade school and you saw the eclipse of the sun come through onto another paper. So the question to the driver was obvious,
"Won't he go blind"
"Of course, he will! he answered, " But there are many more waiting for that job and masks are expensive. They will send money home so that when they go blind they can go back to their farm in the country and their family will take care of them. They can retire for the rest of their life with what they will make."
No meddling big brother in Chinese business.

Another member of the family worked for CaseIH. His job was to source circuit boards for instrument panels for tractors. The current US cost was 36 bucks per unit. A Canadian bid came in at 30. That was enough to relocate some business but before the deal was done a Chinese bid came in at 4 dollars. Off to Bejing he went to see if it was too good to be true.

They took him on a tour of the factory. Again, young men had come from the country to get jobs in the city and make their fortune. The building looked about the size of the Astrodome with the living quarters making up the outer walls around the factory. Each room was about six feet by eight. In order for each room to accommodate twelve, six slept while six worked. The six sleeping had to lay, 3 with heads to one wall next to the feet of the other 3 who slept with their heads to the opposite wall.
Lunch came to them in bulk piles in wheelbarrows. He was not hungry.

As the tour moved onto the factory floor, the lights would come on just in the section they were about to enter. As they moved through, the lights of that section would go off again behind them. When asked about the lights the response was that the problem was that the lights bothered the workers whose eyes were used to the low light conditions and they would do better work with them off.

Needless to say they continued to build the instrument panels in Canada and the US.

This is not politics. It is nothing but business and everyone should know their competition.