Special Report: ENTERPRISE: International: ADVENTURE
HE CAME, HE SAW, HE'S CONQUERING
When Timothy Dunne took his brother Michael to the airport in July, 1990, he didn't even ask when Mike would come back from Thailand. He figured it would be about six months. "He had a suitcase in one arm and a Mac slung over his shoulder, but he didn't have a job, didn't know anyone, and hardly had two nickels to rub together," Tim recalls. "Did I think he was nuts? Well, yeah."
Four years later, Tim was Bangkok-bound himself, leaving the familiar surroundings of his native Detroit to become director of research at Automotive Resources Asia Ltd. (ARA), the rapidly growing company his older brother had founded. Starting with just two clients in late 1992 from an office above his kitchen, Michael Dunne has built a company that expects to take in $1 million this year. ARA's 20 employees--including Mike's college roommate--are scattered throughout Bangkok, Beijing, Ho Chi Minh City, and Detroit. ARA's mission: to help foreign companies large and small break into Asia's booming auto markets.
For Mike Dunne, 32, going global isn't just for companies with billion-dollar purses and brand-name recognition. He figures that as mature markets shrink in the West, small companies and adventurous entrepreneurs can capitalize on the wealth of opportunities in Asian countries, too. "In Asia, the longer your commitment, the greater the dividends, both personal and professional," says Dunne.
Consider what he was able to accomplish for Chrysler Corp. In 1993, Kerry Ivan, then Chrysler's Southeast Asia director, put 150 Jeeps bound for Phnom Penh in storage in a Bangkok customs warehouse while waiting for hostilities to cease in Cambodia. During the three months the cars spent in the warehouse, customs officials bumped the storage rate from the initial $3 per day per car to a steep $43. The final bill, $457,000, just about pushed Ivan over the edge.
So he called Dunne, who was already helping Chrysler on a tax matter. "Mike," Ivan said, "I've got a problem here." The desperate Chrysler executive wanted the young American to use some of his contacts with officials in the Thai Finance Ministry and Board of Investment. Instead, Dunne gave Ivan a crash course in Asian negotiating style: Keep your cool. Don't confront. Be persistent. Compromise and it'll work out. With that in mind, Ivan became a frequent visitor to the Customs Dept. and the Port Authority. After six weeks of daily negotiations, the Thais agreed to knock 30% off the bill. As it turned out, the episode enabled Chrysler to develop a long-term and vital working relationship with the customs authorities.
Dunne had the good fortune to be building his business just as Detroit began to get serious about the possibilities in Asia. Besides Chrysler, Dunne has acquired an impressive list of clients that includes such big names as Dana, TRW, and Volvo Truck, as well as smaller companies such as City Machine Tool & Die Co. Ltd., a Muncie (Ind.) producer of specialized industrial machinery. Eschewing the term "consultant," which he considers vague, Dunne describes ARA as a "reconnaissance and investment company." Services include research, identification of partners, local representation, and support in government and private negotiations.
ROOM TO GROW. Dunne shatters the notion that Asian markets put up fortresslike barriers to U.S. small businesses. He was not only able to found a successful consultancy for himself but also able to help City Machine, a tiny newcomer to Asian markets, get contracts in countries as seemingly impenetrable as Thailand and China. Asia now makes up 10% of the machinery maker's total sales, which have doubled in the past two years.
For Americans, setting up shop in Thailand is surprisingly easy. Under a 1968 treaty, U.S.-owned and -managed companies can be locally incorporated. But there are potential pitfalls. For example, while Thailand has double-taxation agreements with 26 nations, including most of Europe, it doesn't have one with the U.S. That means small businesses such as ARA that are without the clout to make special deals with Bangkok are taxed by both U.S. and Thai authorities. That penalty probably won't last forever, though, since Washington and Bangkok are finally making progress on a double-taxation agreement.
With Asian auto markets booming from Bangkok to Beijing, Dunne sees plenty of room for growth. He has earned high marks from his customers so far. Chrysler's Ivan calls him "probably the most knowledgeable person in Asia on the auto industry today." But his company is small and would be hit hard if a major client walked away.
The auto industry was a natural for a Detroit native whose father was the longtime autos editor of Popular Mechanics. But the path to Asia was less direct. "I grew up in a city in decline," Dunne says. "I thought, `there has to be more than this."' So after enduring the U.S. Marine Corps Officer Candidate School's grueling Platoon Leadership program, he studied politics for a year in France and then spent two years teaching English in China. Finally, in 1988, he headed back home to get an MBA and an MA in Chinese and Thai studies from the University of Michigan.
He found the transition almost more than he could cope with when he arrived in Thailand in 1990. "I had huge expectations of what I could do here," he says. Those were nearly dashed during his first year in Bangkok, when he barely supported himself by working as a freelance writer and researcher. His break came when an official at the Thai Board of Investment wanted a copy of a report he had written on the Thai auto industry. When he went to deliver it, he met a director of Southeast Asia Management Investment Corp., an Anglo-Thai joint venture that was advising the government on how to encourage direct foreign investment. The director gave him a job. While working there, Dunne established a relationship with what turned out to be his first two real clients: Dana Corp. and Chrysler. With this meager customer base, Dunne paid a local law firm about $3,500 to do the paperwork, and ARA was officially born on Mar. 3, 1993.
In its first year, ARA did "nothing spectacular," in Dunne's words. He spent every day trying to get Chrysler into the Thai market. That paid off in '94, when the government reclassified Jeeps, allowing the price to fall $6,000 to $50,000. Things also picked up in '94. In July of that year, ARA did strategic research for AC Rochester, a Flint (Mich.) company now known as Delphi Energy & Engine Management Systems, identifying Malaysia as the best place for the company to focus its first Asian efforts. Soon it had a valuable contract to supply engine management systems to the national carmaker Proton for its Saga sedan.
That year, Dunne also helped Dana become the first U.S. auto industry manufacturer with a Vietnam presence. He suggested the company take the plunge; then he helped it establish a relationship with the Vietnamese government.
Dunne has the advantage of being in a service industry, not in manufacturing. That serves him well in Asia, where the transition to an industrial economy is well under way, but the need for a healthy services sector is just beginning. Having gotten in on the ground floor, it may be quite a while before the Dunnes go home.
DUNNE'S TIPS FOR AMERICANS IN ASIA
-- Study the country's and region's culture-not just the vital statistics
-- Join up with a U.S.-based trade association or a U.S. Commerce Dept. office
-- Team with local affiliates of larger U.S. companies
-- Offer face-saving compromise when problems arise
-- Establish personal relationships through frequent meetings with local executives
DATA: BUSINESS WEEKBy Edith Hill Updike in Bangkok