Chapter 937
Making an example of someone to warn others: Rules must be followed.
“The five social insurances and one housing fund are nominally paid, but the base for payment is based on the local minimum wage standard, not the employee’s actual salary. This means that the social security benefits that the employee can actually enjoy are greatly reduced.”
"Regarding working hours, the schedule appears to comply with regulations, but after checking the clock-in records, we found that a large number of employees are obligated to work overtime—that is, they continue to work after their shift ends without clocking in."
"Regarding the base salary, they used a more covert method, breaking down the basic salary into several parts: base salary, position allowance, performance bonus, and full attendance bonus. At first glance, the total amount is not low, but the social insurance and housing fund are only paid according to the base salary, and overtime pay is also only calculated based on the base salary. The money that employees actually receive is much less than what is written in the contract."
He flipped to the appendix of the audit report, which contained several photos—screenshots of attendance records, photocopies of pay slips, and records of employee interviews.
“During the audit, our team encountered significant resistance. Pegatron refused to provide some of the original data, citing trade secrets. We later presented the contract terms, clearly stating that non-cooperation with the audit would be considered a breach of contract, and they reluctantly cooperated. However, even with their cooperation, the data they provided was processed, and many original records had clearly been tampered with. Our auditors had to put in a lot of effort to verify the truth indirectly.”
Wang Donglai pulled over the audit report from Heshuo and flipped through it page by page.
He flipped through the pages slowly, lingering on each page long enough to imprint the numbers and photos into his mind.
His gaze stopped when he turned to the page with the employee interview records.
The record above contains a conversation.
An auditor asked a female worker who had worked on the assembly line for three years: "How many hours do you actually work each day?"
The female worker hesitated for a long time before finally whispering, "From 7:30 in the morning to 9:30 in the evening, with a 40-minute lunch break in between."
The auditor then asked, "How is it shown on the attendance records?"
The female worker lowered her head and spoke even softer: "The team leader told us to clock out first, and then come back to continue working."
Wang Donglai stared at this page for a long time, then closed the report, looked up at Liao Qingfeng, and asked, "What is Apple's stance?"
"Cook called me personally."
Liao Qingfeng said, "His attitude is very clear - Pegatron's problems must be rectified. He said Apple will send someone to communicate with Pegatron and strive to complete the rectification within a quarter. Judging from the current communication, Apple's attitude is serious, not perfunctory, and they are really pushing forward. Cook even proposed a very sincere approach, saying that if Pegatron's rectification is not in place, Apple is willing to reassess the allocation ratio of contract manufacturers and transfer more orders to Foxconn."
Wang Donglai was silent for a few seconds, then tapped his fingers lightly twice on the table.
“Give them a quarter of time, and report the rectification results directly to me. If Pegatron is still in this state by then, the supply of Hwabu batteries to Apple will be suspended until the rectification is completed. Also, share the audit results of Pegatron with Foxconn – not to put pressure on them, but to let them know that we can see those who are doing well.”
Liao Qingfeng turned to the next page, his brows furrowing slightly.
"Next is the four-star level, which is somewhere between meeting and not meeting the standards. They pay the five social insurances and one housing fund, their working hours are reasonably controlled, and their base salary is about 20% higher than the industry average. They haven't taken any action on employee stock ownership at all, because the approval process at their headquarters in South Korea is quite complicated and takes time. Judging from their attitude, they are watching and waiting—if we relax our standards, they will relax them; if we tighten them, they will tighten them."
"What problems were found during the audit?" Wang Donglai asked.
"The data is basically true, and no obvious falsification was found. However, there is one point—the feedback from employee interviews is generally low. It's not because of poor treatment, but because the management style is rather rigid, the hierarchical concept between superiors and subordinates is very strong, and the employees are under a lot of mental pressure. A production line team leader who has worked at Four Star for five years said that what he fears most is not overtime, but the morning meeting every day—standing in a row and being criticized by the supervisor by name, that feeling is like a primary school student being punished."
Wang Donglai tapped his finger on the table and said directly, "Write this into the audit requirements for the next quarter. Employee morale and satisfaction are not optional, they are mandatory. The compensation is sufficient, but treating people like machines is not our standard. Notify Four Star that if they want to stay in Xuanwu Battery's supply chain for the long term, their management style must change. Let them propose their own solutions, and we will audit them."
Liao Qingfeng wrote it down in his notebook and then turned to the last page of the list of qualified candidates.
"Finally, there's Xiaomi. They pay all the social insurances and housing fund contributions, and the working hours are controlled at around 50 hours per week. In terms of base salary, Xiaomi's front-line workers' base salary is 20% higher than the industry average. However, their supply chain management is still in its early stages—XiMi's own factories can do it, but the contract manufacturers need time to push it forward. Lei Jun's attitude is very clear. He promised to complete the rectification of all contract manufacturers by the end of the year. If he cannot do so, he is willing to accept a reduction in the supply share."
Wang Donglai nodded, his eyes reflecting a judgment based on years of cooperation.
“Lei Jun is a man who usually keeps his word. Give him time, but the audit needs to keep up. He needs to submit a progress report every month, and we need to keep you updated on any problems that arise.”
Liao Qingfeng closed the first document and put it aside.
Then I picked up the second document—this one was much thinner than the first, but it was by no means light.
He turned to the first page much more slowly than before, as if giving himself some time to adjust.
"Boss, the next few didn't meet the target."
The air in the office seemed to have become heavier.
Wang Donglai didn't move, but his gaze returned from the window to the documents in Liao Qingfeng's hand.
There are three companies on the list.
Liao Qingfeng's voice carried the caution one would show when dealing with a thorny issue. "CATL, Panasonic, and a smaller one—New Wanda."
He first turned to the page about New Wanda.
"The problems at this company are quite straightforward. They pay social insurance and housing fund contributions, but the base amount is incorrect. Their working hours are severely excessive, and their attendance records are falsified. Their base salary is extremely low, and most of their wages are covered by overtime pay. There is no employee stock ownership plan at all. During the audit, their attitude was not particularly bad, but their willingness to rectify the situation was very weak—in short, they felt that they were too small for us to keep an eye on them."
"Notify them."
Wang Donglai's voice was not loud, but every word was clear: "All supply quotas have been cancelled, with no rectification period. Being small in size is not an excuse, it's a matter of attitude. Transfer their quotas to BYD and Tesla."
Liao Qingfeng wrote it down in his notebook and then turned to the second page.
The annotations on this page are much denser than those on the Xinwangda page; almost every line has issues circled in red.
"CATL".
The moment the name was mentioned, Liao Qingfeng's tone changed.
It's not the kind of coldness that Panasonic has, but something more complex—like dealing with someone who clearly has the ability to do a good job but just doesn't.
“CATL’s problems are different from those of New Wanda and Panasonic.”
He turned the document over so that Wang Donglai could see the annotations on it.
"They pay the social insurance and housing fund contributions, but the base for these contributions is lower than the employees' actual wages. This is similar to Pegatron's practice, but to a lesser extent—they use a base of about 70% of the actual wages. Regarding working hours, they appear to comply with regulations, but in reality, the phenomenon of unpaid overtime is widespread. During the audit team's undercover investigation, some workers reported that their actual working hours exceeded ten hours a day, but their attendance records only showed eight hours. This problem is less prevalent than at Pegatron, but it does exist."
"Regarding base salary, CATL's frontline workers' base salary is only about 5% higher than the industry average, which is the lowest among all our partners. Their average salary doesn't seem low, mainly because overtime pay accounts for the majority. There's absolutely no action on employee stock ownership; there's not even a plan." He turned to the next page, which was a photocopy of a financial statement, with several densely packed numbers circled in red.
"But that's not the most crucial issue. CATL's core problem is a severe imbalance in profit distribution. We reviewed the financial statements from the past three years and found a very clear trend—revenue is increasing, profits are increasing, but the wage increases for frontline workers are lagging far behind the salary increases for senior management."
He pointed to a line of numbers on the form.
"The year before last, CATL's net profit increased by 32%, the average wage of front-line workers increased by 1.3%, and the total compensation of senior executives increased by 22%. Last year, net profit increased by 41%, front-line workers' wages increased by 2.1%, and senior executives' wages increased by 34%. In the first half of this year, this trend continued—net profit increased by 38% year-on-year, front-line workers' wages increased by 2.5%, and senior executives' wages increased by 27%."
He turned to the next page of the document, which contained a comparison table of dividend data.
“What’s even more serious is the dividend payout. Last year, CATL doubled the total dividends paid to its senior management compared to the previous year, but frontline workers received no dividends at all. They kept the vast majority of profits at the senior management and shareholder level, with the proportion passed down to lower levels being almost negligible.”
Wang Donglai pulled over the financial statement and flipped through it page by page, asking as he looked, "What did Zeng Qun say?"
Liao Qingfeng's voice carried a hint of helplessness: "President Zeng's attitude... how should I put it, it's very ambiguous."
"He admitted that CATL did have shortcomings in employee benefits and was willing to make improvements, but the improvement plan he proposed was far from sufficient—full social insurance and housing fund contributions, working hours controlled within 55 hours, and a 5% increase in base salary. As for the adjustment of senior management salaries and the redistribution of profits, he did not give a direct answer, only saying that it needed to be discussed by the board of directors. I spoke with him three times, and each time he said 'it is being pushed forward,' but each time the plan he gave did not make any substantial progress."
"It needs to be discussed by the board of directors."
Wang Donglai repeated these words in a very calm tone, but Liao Qingfeng could hear the coldness beneath that calmness.
"When the contract was signed, he signed on behalf of CATL. The contract stated that 'CATL promises to meet all employee benefits terms,' not 'CATL promises to meet all employee benefits terms with board approval.' A contract is a contract; there was no board discussion of this precondition."
"Tsk, looks like I'm still too soft-hearted!"
Last time, the two had already fallen out, and Wang Donglai was even prepared to give up on cooperating with CATL.
However, later on, Zeng Qun personally came to Wang Donglai's door to renege on the cooperation. Wang Donglai, wanting to expand the scale of domestic production, did not refuse and agreed.
The result is the current situation.
He leaned back in his chair, his gaze fixed on the window. In the distance, tower cranes were turning at the construction site of the Tang Imperial City, casting the shadows of their steel arms on the ground like giant pointers in the sunlight.
He was silent for about ten seconds, then sat up straight, his voice not loud, but firm.
"The CATL matter will be handled in three steps. First, formally notify Zeng Qun that the supply share of Xuanwu Battery will be reduced by 30% starting next quarter. The reason should be clearly stated: it's not because employee compensation is inadequate, but because their submitted rectification plan lacks sincerity. The reduced share will be transferred to BYD and Tesla, and you can determine the specific allocation ratio."
Liao Qingfeng quickly took notes in his notebook.
"The second step is to notify CATL that the following conditions must be met to restore supply share. First, social insurance and housing fund contributions must be paid in full based on actual wages; this will be a key focus of our audit next quarter. Second, working hours must be controlled within 50 hours per week, and the issue of mandatory overtime must be completely resolved. Third, the compensation and bonuses of senior management must be linked to the wage increases of frontline workers—the amount of wage increase for frontline workers must be equal to the amount of wage increase for senior management, with a minimum one-to-one ratio. In other words, if senior management wants to increase their own salaries by 10%, the average wage of frontline workers must first increase by 10%. Fourth, a fixed percentage of the annual net profit, no less than 5%, must be allocated as a special bonus pool for frontline workers; the allocation plan must be submitted to us for record-keeping and auditing."
He paused, then added, "These four conditions are non-negotiable. If Zeng Qun feels he cannot meet them, he can choose not to restore his share."
After Liao Qingfeng finished writing down the last item, he looked up and asked, "Boss, there might be a backlash from Zeng Qun. CATL is a big company, what can we do if they stubbornly refuse to change? Reducing the supply share by 30% will affect their financial statements, but it may not force them to completely change course."
Wang Dong looked at him, his lips twitching slightly, not in a smile, but with a very confident expression.
“He can’t hold on. Xuanwu batteries now account for more than 40% of CATL’s high-end production line shipments, and the profit margin of this part of the orders is much higher than that of their own battery products. If he loses this 40%, his financial statements will look very bad—it’s not just a matter of a little less profit, but the entire valuation logic will be shaken. The capital market will not give him time to slowly hold on; the stock price will make the decision for him.”
Liao Qingfeng closed his notebook and mentally reviewed Wang Donglai's words once more.
He knew the weight of this decision—CATL was one of Xuanwu Battery's largest partners, and a 30% reduction in market share meant the transfer of billions of dollars in orders every year.
But Wang Donglai’s tone showed no hesitation, which was enough to prove how angry CATL’s actions made him.
"There's one more thing."
Wang Donglai's tone suddenly softened, and he said, "You've been doing audits lately, and you've seen a lot of the real situation on the front lines. Don't just lock this information in reports. Compile a version that can be made public, and release the key data—not to embarrass anyone, but to let the entire industry see what standards are achievable, who has achieved them, and who hasn't."
He picked up his teacup, took a sip, and shifted his gaze from Liao Qingfeng's face to the view outside the window.
“Once the rules are established, transparency itself becomes a force. Those companies that are still observing will do their own calculations after seeing this public report.”
Liao Qingfeng nodded in agreement, then asked another question: "Boss, if Zeng Qun wants to talk, what should I do?"
Wang Donglai put down his teacup and turned his gaze back to Liao Qingfeng.
“Tell him that I’m only giving him one last chance to talk in person. When he comes, he should bring a sincere rectification plan instead of coming to discuss the ‘board approval process’ with me again.”
"This is his last chance, and CATL's last chance."
Liao Qingfeng nodded, opened the door, and went out.
The air conditioning vents in the corridor blew out cool air, sweeping away the stuffy heat he had brought from the meeting room.
He stood in the corridor, took a deep breath, and then looked down at the briefcase in his hand—the documents inside each represented a supply chain structure worth tens of billions.
But after today's report, this situation is about to change again.
CATL's price was reduced by 30%, and New Wanda was eliminated from the competition.
BYD and Tesla will gain more market share, and the supply of semiconductors will also increase.
These changes will affect the distribution of profits throughout the entire new energy vehicle industry chain—from upstream material suppliers to downstream car manufacturers, from frontline workers in factories to investors in the capital market, every link will be repriced.
This time, through Wang Donglai's response, he finally understood that Wang Donglai was serious and not just spouting slogans.
This rule isn't just a written clause; it's a new standard that's been built on real orders and that the entire industry has to take seriously.
Whoever complies stays; whoever shirks responsibility is eliminated. There is no third option. (End of Chapter)