Tue, Jun 10, 2003 page10

• A successful Tsai is an average Joe

  SHOEMAKING EMPIRE The rags-to-riches story of Tsai Chi-jiu is no surprise to those familiar with his humble demeanor, but critics have plenty to say

  • REUTERS
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  Tsai Chi-jui (蔡其瑞) worked his way up from doing late-night piecework for textile companies in Taiwan to becoming the top producer of shoes for the slickest athletic brands in the world.

  But Tsai, the son of humble weavers, is rarely seen on the cover of a magazine or even in a business suit. An intensely private man, he kept a low profile yesterday even as one of his companies joined Hong Kong's blue-chip stock index.

  Associates of the 65-year-old businessman say you would have a tough time picking him out in a crowd.

  His main characteristics -- laughing eyes and a smile that reveals a golden tooth -- belie his strategic mind and clout from Beijing to Taipei, they say.

  "If you run into him at work, you'd never think he's the boss," said a senior executive and 25-year veteran of Tsai's Pou Chen Corp (寶成).

  Described by colleagues as an incurable optimist, Tsai heads the world's biggest manufacturer of branded shoes with a 16 percent global market share. His empire employs a quarter of a million people in factories spanning China, Indonesia, Vietnam and the US.

  The family-run Pou Chen is the biggest supplier of sports shoes for the world's top five athletic brands -- Nike Inc, Reebok International Ltd, Adidas-Salomon AG, New Balance Athletic Shoe Inc and Asics Corp.

  It also makes casual shoes for Timberland Co, Reebok unit Rockport Co Inc, privately owned Clarks of the United Kingdom and Jones Apparel Group Inc's Easy Spirit.

  Like many Taiwanese businessmen who have quietly amassed fortunes by investing in low-cost China, Tsai hobnobs with political and business leaders on both sides of the Taiwan Strait, helping to turn the greater China region into the world's most well-oiled export machine.

  It's an industry that has had its share of controversy -- especially after Tsai's Pou Chen got bad press in 1997 over alleged poor working conditions. When a supervisor at its Vietnam plant, which made shoes for Nike, was sentenced to six months jail for physically abusing workers, critics slammed Nike and its contract manufacturers. Pou Chen pledged to do better.

  Tsai's empire is once again back into the limelight as his Hong Kong-based Yue Yuen Industrial (Holdings) Ltd with an annual turnover approaching US$2 billion, joined the Hang Seng Index on Monday, cementing its stature among the territory's blue chips.

  Tsai started out as a fine arts teacher at a small high school, earning extra income by doing piecework for various factories in the evenings.

  Full of creative ideas on how to improve production, Tsai went into business himself in 1969, setting up a factory making rubber shoes in Changhua with three brothers.

  The family business prospered in the 1970s, mirroring the rise of Taiwan's export-driven economy, and Pou Chen signed on Adidas as its first big-name client in 1980.

  The deal gave the firm the international exposure that soon brought in other multinational athletic wear companies.

  Faced with rising labor costs and an appreciating Taiwan dollar, Pou Chen's exports started to lose their competitive edge so Tsai began to move his factories to China in 1988 -- among the first wave of Taiwanese investment there.

  "Tsai Chi-jui sees problems in a three to five-year timeframe and is a real strategist," said the senior executive, who declined to be identified.

  At weekly brainstorming strategy meetings, the biggest and most ambitious ideas always come from Tsai, he said.

  In recent years, Tsai has folded most of his shoe business into Yue Yuen and steered Pou Chen into the high-tech industry, producing PC components, motherboards and integrated circuit (IC) design. Tsai has also invested in a bank in China.

  While critics say Pou Chen is late in entering the electronics sector, Tsai pays them no heed. Many had labelled the shoe business as a sunset industry before Pou Chen turned it around, he said in a rare interview with the local Win-Win Weekly (今周刊).

  "Pou Chen cannot depend only on Yue Yuen for growth, so we have to plan technology investments one by one, wait for them to be profitable for six months before absorbing them into Pou Chen," the magazine quoted Tsai as saying in late November.

  Pou Chen's first-quarter profit nearly tripled to NT$3.18 billion (US$92 million), even as the economy struggles to recover from its worst ever recession in 2001.

  Tsai's personal assistant, Alvin Hu, credits his boss' success to a modest style, mild manner and willingness to swallow unfavorable terms when negotiating with new business partners.

  "He told me once: Only people with big stomachs have good fortunes," said Hu, quoting a common Taiwanese saying.
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