Lift going down

Otis in PR storm after equipment malfunctions

Lift going down

Elevator heaven?

When Elisha Otis took an axe to the hoist rope supporting his elevator at the 1854 World’s Fair, most onlookers thought he was done for. For half a second, he might have regretted the decision. But then his elevator’s brakes engaged as planned.

That demonstration gave the world it’s first ‘safety elevator’ and launched Otis and his company on its journey as a major force in escalator and elevator manufacturing.

In China, foreign companies have tended to be the beneficiaries when safety scandals break (the dairy industry being an obvious example). But even for international firms, reputations built up over decades can be lost in a much shorter timeframe. And a couple of mishaps over the past few months have seen Otis’ own image called into question.

Back in December, an Otis escalator in the Shenzhen Metro reversed suddenly, injuring 25. But the real crisis came earlier this month. On July 5th, an escalator at the Beijing Zoo metro station also went into reverse. This time the consequences were far more serious. At least 30 people were injured, and a 13 year-old boy was killed.

It was a PR storm for the company. Photos of the injured being moved to hospital on gurneys featured prominently in the local media, as did their acounts of the accident. “First there was a crashing sound, then the rising escalator started going down,” one victim told the China Daily. “Then wave after wave of people began falling. I thought I was finished.”

Otis says it’s cooperating with the government’s investigation into the accident but is yet to comment on what it thinks to have been the cause. The malfunctioning escalator was still under warranty (the line opened in 2009), and is supposed to be checked every 15 days. It passed an inspection by an Otis maintenance engineer on June 22, according to Xinhua.

But there has also been speculation that subway operators may have been skimping on costs by buying light-duty escalators, less capable of handling high-volume passenger flow in Chinese conditions.

Otis denied this directly for the Beijing Zoo station. “I’m responsible for telling you this: all the Otis escalators used in subway projects are heavy-duty escalators. You can tell from the type,” said Li Mingjie, spokeswoman for Otis China.

That hasn’t stopped a flood of criticism coming in the Otis direction. “[Otis has] unavoidable responsibility for the accident,” Zhang Juming, a senior quality official in Beijing told reporters. His initial review suggested that “design and manufacturing faults” caused the malfunction.

In the meantime, the General Administration of Quality Supervision has ordered that all escalators of the same model (OTIS 513 MPE) be shut down pending safety tests (there are 257 in Beijing alone).

Last year, China installed more than half of the world’s new elevators, and the country is expected to build 50,000 skyscrapers over the next 15 years (defined as buildings over 30 floors), estimates McKinsey. Otis is also the current market leader in China, with a 20% share, according to 21CN Business Herald.

The escalator market is just as important – with 44% of the world’s escalators now in China.

“As the results of the investigation have not yet come out, we are not yet able to make a clear forecast about future [sales],” an Otis official stonewalled to the 21CN. But it will be hoping to keep its reputation largely intact. “Purchasers, including government buyers, prefer foreign brands over domestic ones and a single accident won’t change their thinking much,” Peng Jinsheng, an expert with the Beijing Chamber of Elevator Commerce told the China Daily.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.