The New Equipment Industrial Park

 THE 30 years from 1978 to 2008 have witnessed China's rise in the world economy amid industrial restructuring and the rise and fall of various enterprises, both state-owned and private. Some state-owned enterprises have been merged, while others have grown stronger and bigger through effective restructuring and reform. Freet Petroleum Equipment Company Limited is among the latter.

Predecessor

    Before 2005, the Freet Company was called the General Engineering Machinery Factory of Shengli Petroleum Administrative Bureau, established in 1964 as an affiliate of the Shandong-based Shengli Oilfield, a subsidiary of Sinopec Corp.

    In the early days of the People's Republic, heavy industries, especially machinery manufacturing, were prioritized and regarded as vital to national security and the nation's economic development. As a major industrial raw material and an item of strategic military importance, crude oil was central to the national economy. In this context, the discovery and construction of Shengli Oilfield – the second largest in the country – had great significance for New China. The predecessor of Freet was born and grew up alongside the oilfield, sharing all its hardships and glory.

    In the four decades preceding 2005, the General Engineering Machinery Factory experienced three stages of development. From 1964 to the late 1980s, it primarily serviced the oilfield, and its business expanded from auto repairs to auto manufacturing.

    The period from 1989 to 1997 was China's second decade of reform. But unlike many other state-owned enterprises at this time, the factory felt little pressure in terms of survival, as it fared quite well under the umbrella of the oilfield, which was little disturbed by the groundswell of change. Nevertheless, it upgraded its major business from machine repairing to machine manufacturing, and supported more than 2,000 employees by making sucker rods and pumping units, and processing oil pipes.

    From 1998 to 2004, the market economy took shape and the reform of state-owned enterprises reached a deeper level, in order to acclimatize them to fierce competition with multinationals on the global market. The factory undertook reform measures to optimize its operation and developed new products such as plastic composite tubing and carbon fiber reinforced continuous sucker rods. It established three major operations: pipe processing, oilfield-use vehicle refitting, and oil equipment manufacturing. Its annual sales approached RMB 500 million. All its products passed ISO9001 quality management system certification. In addition, its oil equipment obtained a license from the American Petroleum Institute. Its special vehicle refitting passed China Compulsory Certification (a product qualification system the Chinese government introduced in accordance with relevant WTO agreements and international practices in order to guarantee human, animal and plant safety and protect the environment and national security). Finally, its PE pipes and sucker rods obtained the title of "Shandong Famous Brand" in 2004.

    However, the factory was still shackled by a management structure from the era of the planned economy, and modern corporate reform was badly needed to ensure long-term sustainable development.

Restructuring

    As an oil machinery producer under Sinopec, the factory has inevitably been swept up in the trend of economic globalization, which has forced it to refit and wean itself from the mother enterprise.

    In the three years before 2000, the factory witnessed strident advances, turning losses into profits and increasing sales revenue from RMB 200 million to 400 million. But from 2000 to 2004, its sales hovered somewhere between RMB 400 million and 500 million. Corporate restructuring was imperative for the factory to keep up with the rapid development of the oil industry and to sharpen its competitiveness.

    The factory restructured its assets, which included separating its bad assets and social-function obligations. As restructuring meant uncertainty and went against the interests of some employees, 85 percent of the workers voted against it or abstained. The leadership of the factory talked patiently with staff, and Ma Houquan, the incumbent Party secretary, gave seven speeches. Finally the workers were convinced, and disagreement was transformed into a wondrous support rate of 93 percent.

    On August 12, 2004, the workers' representative congress of the factory convened. It passed a "Preliminary Restructuring and Segmentation Plan" with 100 favorable votes, 10 against and one abstention. The factory then forwarded the plan to the Shengli Petroleum Administrative Bureau and applied for its implementation. Later, the State-owned Assets Supervision and Administration Commission of the State Council, Sinopec Corp., and the Shengli Petroleum Administrative Bureau gave their approval. On April 16, 2005, the new company called its first shareholders' meeting as stipulated by the Company Law, where shareholders elected a board of directors and a board of supervisors according to the amount of investment, and appointed an executive team. On May 28, the Shengli Oilfield Freet Petroleum Equipment Company Limited was founded.