Honeywell International Inc. is a $31 billion globally diversified technology and manufacturing company organised into four strategic business groups: Automation and Control Solutions, Aerospace, Specialty Materials and Transportation Systems. Honeywell established its first franchise in Shanghai in 1935. Honeywell has over 9,000 employees across 15 Chinese cities, with total investments exceeding $600m. China sales reached $1.4 billion in 2009.

Given Honeywell’s rapid Chinese expansion via acquisitions and organic growth, it was important for Honeywell Treasury to establish a strategic roadmap to achieve the following key objectives:

• Build a stable and effective treasury organisation, focusing on people, processes, controls and technology.
• Establish an efficient banking structure.
• Improve operational efficiencies within Honeywell.
• Release trapped cash from China in a tax efficient manner.
• Monitor and respond to constantly changing regulations.

These objectives raised challenges that the Treasury had to address. Broadly speaking, these can be grouped as follows:

• Regulatory challenges

  China’s regulatory environment is complex and constantly changing.

• Banking landscape challenges

  China’s banking industry remains fragmented with a proliferation of local banks at national and regional levels, alongside growing numbers of locally incorporated foreign banks.

• Organisational challenges

  As Honeywell expands into different Chinese regions, new legal entities are being established; currently Honeywell maintains 61.

Implementing change is never easy in China but Honeywell has managed to achieve all five aforementioned objectives, delivering outstanding benefits, including:

• Reduced bank credit lines.
• Reduced bank charges.
• Productivity gains eg significant improvements in the percentage of cash balance actively invested.
• Improvements in DSO, DPO and cash conversion cycle.
• Yield enhancement.

The strategy focused on overcoming China’s fragmented banking landscape through the appointment of a panel of local and foreign banks. In doing so, Honeywell Treasury was able to leverage the comparative advantages of both to provide optimal solutions across the entire spectrum of Honeywell’s banking needs. Furthermore, with the banks’ help, Honeywell Treasury optimised cash and liquidity management. This was done using innovative and effective cash management structures, implemented with primary partner bank, Citibank. Chinese renminbi and US dollar cash pools were established to automate the concentration of Honeywell’s cash balances in China for effective internal re-deployment and/or investment, leaving the lean treasury team with more time to focus on value-added activities.

As Pui Yee Lee explains, “We have successfully overcome a series of challenges and implemented a host of best-in-class solutions spanning a broad spectrum of finance activities, in a shorter than expected time frame. These solutions have brought about tangible bottom-line results as well as qualitative benefits to Honeywell China. Furthermore, Honeywell Treasury’s effective organisation design not only kept the team stable, lean and highly productive, but it has encouraged a set of behaviour that focused on continuous improvement and proactive partnering with internal and external stakeholders.”

Despite impressive results, Honeywell Treasury has no plans to rest on its laurels. Instead, the team remains focused on delivering results through consistent execution, to maximise value creation for Honeywell’s businesses in China.