Denninger points this out:
"But - in the end this will kill GE's medical imaging division. GE had better pay attention to what happened to Fellowes - the paper shredder manufacturer. They moved their manufacturing under a "joint venture" view of the world - the Chinese stole their technology and ultimately effectively stole the tooling and factory too!
While GE can (and will be able to) block Chinese knock-offs from being imported into the US, given its serious political muscle in the United States, there is nothing they can do about sales in China itself, which will ultimately drop to zero."
Here is the story on Fellowes disaster in China:
Fellowes Inc., one of the world's largest makers of office and personal paper shredders, is witnessing the destruction of its business, as its large Chinese manufacturing plant has been shut down by its joint venture manufacturing partner.
The company's Chinese joint venture firm has barred 1,600 employees from entering the plant, stolen all of its proprietary manufacturing production equipment and forced the venture into bankruptcy. The contracts Fellowes signed with its Chinese production company meant nothing. For Fellowes, there is no such thing as rule of law in China.
The Itasca, Ill.-based company has lost $168 million worth of business and is no longer able to produce personal shredders for the world market. It has taken its case to Chinese courts, to no avail. It has pleaded with members of Congress and federal agencies, with no results.
Fellowes entered into the joint venture in China in 2006 with a company called Shinri to build a factory in southern China to manufacture inexpensive shredders. Shinri is part of a large holding company called New United Group owned by the Zhou family. Fellowes and Shinri produced shredders bearing Fellowes' brand and incorporated Fellowes' proprietary product and process technology. The shredders were produced exclusively for sale to Fellowes and its subsidiaries. Under the agreement, Fellowes owned the tooling and intellectual property used to manufacture the shredders in the factory. The joint venture manufacturing facility had 120 Chinese suppliers.
"For over three years, this engagement resulted in a very productive relationship, with Shinri manufacturing and shipping our goods to Fellowes' locations throughout the world," says James Fellowes, a third-generation chairman and CEO of Fellowes Inc. "Shinri enjoyed a 100 percent-plus return on investment for each of the years and this return on investment was always paid on time."
But in 2009 everything changed when the leadership of the Chinese company shifted to another Zhou brother. Over the next year, the Chinese company "gradually attempted to usurp control
in direct violation of the joint venture agreement," Fellowes told a recent hearing of the House Foreign Affairs subcommittee on Asia and the Pacific. "Shinri methodically imposed unreasonable requirements on Fellowes in an effort to extort more profit and ultimately control the global shredder business in direct violation of our contract."
http://directorblue.blogspot.com/2011/04/how-outsourcing-to-china-cost-fellowes.html
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