Global Tier 1 component supplier Delphi Corporation has a clear agenda to focus on speedier growth by leveraging the opportunities arising out of emerging nations. This growth is to be carved out from its five business units – Electronics & Safety, Powertrain, Electrical/Electronic Architecture, Thermal, and Product & Service Solutions – each with its own mandate. Delphi Thermal Systems (DTS), which has aggressive plans to contribute to the growth trajectory, especially in the Asia-Pacific region, is increasing its investments in its operations in India, China, Thailand and a few South East Asian countries.
In line with this strategy, DTS aims to intensely focus on all its product lines and also undertake aggressive investments, partnerships and acquisitions to support its targeted customers on product development. The high-growth Indian market is clearly in its crosshairs and it plans to go all out to achieve its growth target.
A high-powered DTS delegation from its Asia-Pacific operations recently visited India. Speaking to Autocar Professional, Rengan Krishnakumar, managing director (Asia Pacific) - DTS, says the thrust of all the business units of Delphi has been to benchmark itself to the best-in-class safety, being ‘green’ and being connected with the rest of the world. And all the product lines are tailored on those lines as part of the mission.
“We have clear targets to be in the top quartile of our industry across all product lines and our ability to grow the business and maintain margins. We don’t want to be only a big player. Instead, we want to lead the industry and innovate as well. In the last 100 years of the thermal division, we have proved our leadership and we will continue to do that. We are aggressively investing in our technology capability and in our portfolio. We are very realistic and our investments are tailored to our customers and the end user,” he says.
For the last three quarters, DTS' performance has been encouraging, he says. Based on the bookings to date since the last quarter of the last calendar year and the orders in the pipeline for the next few quarters, DTS is poised to grow its revenue by 50 to 100 percent higher than its annual revenue. The company has exceeded all its booking targets in most regions including Asia-Pacific, Europe and the Americas.
Krishnakumar attributes this to improved customer relationships. “It’s all subjective. Until Q3 2009, customers were a little bit concerned. In the automotive industry you book business that is going to start production three years from now. So, they want to know (if) you’ll be around,” he says. “Until Q3 2009 there were some uncertainties with some customers. There were others which have looked at our history and the level of our capabilities,” he says.
Indian market beckons
Drawing attention to DTS’ growth and its relevance to India, he says it has specific applications for the Indian market. The requirements of the vehicles manufactured in India, especially in the A and B segments, are stringent as they call for high fuel economy, small packaging, and the ability to tackle harsh climatic conditions. This in addition to being cost competitive.
“We have been the industry first in bringing in multiple technologies – an innovative radiator in 1910 followed by the air-conditioning system. We also introduced aluminium radiators and substituted the R12 refrigerant with R134a, which made a dramatic improvement to global warming protection at that time,” he says.
However, though Delphi-developed technologies are available for India, customised tech would be the way to go given the special requirements of customers and the climate. To this Krishnakumar says the company constantly innovates – an example is the use of lighter and efficient aluminium radiators. And, he adds that DTS is continually optimising the gauge of the metal and alloys to optimise the efficiency and life of the products which help combat Indian weather conditions.
John G Wurster, chief engineer (Asia-Pacific) – DTS, says that the company is enhancing its fleet test activities, beginning with Mumbai, to introduce new technologies primarily using alternate materials with improved performance. Typically the company will initiate operations in conjunction with a taxi fleet operator as this “will help us understand customer usage as there are lots of stop-and-go situations. Besides, this will also help us understand usage profile,” in terms of the impact on environment, he says.
But Delphi has to do things differently in India. To develop and introduce a new product here, it has to think local but with global capabilities. Krishnakumar says, “We have already done quite a few investments and capability enhancements to offer Indian customers products with local business models to enable them to compete.” For instance, DTS has introduced an automated process to apply a gasket for radiators that are built as a compact unit for Indian customers. This has helped minimise warranty issues.
Process technologies that help provide cost competitiveness in emerging markets are another focus area and they are applied in India, China and Brazil. “Our engineering capability at the Technical Centre in Bangalore and engineering skills developed at our Noida facility that handles advanced engineering assignments indicate that we have achieved a level of maturity. The Indian engineering team can actually lead our technology development, product development and to some extent process development over a period of time. The work of Indian engineers has been recognised as second to none in what they do,” Krishnakumar says with pride.
DTS is fully aware of the importance of the Indian market to its global operations and the company had brought down the entire Asia-Pacific team – from Japan, Korea and China – to India to brainstorm on how the company wants to position itself going forward. “We are discussing on how to take the India team to a higher level where the team can drive global technology as well as product capabilities,” reveals Krishnakumar.
Wurster, who was part of the delegation representing the US operations, says the company is looking at providing thermal control systems for alternate propulsion vehicles and hybrids. With the improving capabilities of the Indian team, the mean time between product development and the start of production has been reducing significantly. The goal now is to look at 40 to 50 percent reduction in the development time. “
This is one example of the local development of products that will support future trends,” he says. He also mentions how the company could develop alternate refrigerants for HVAC systems. “Not only refrigerants but also the entire construction had to be changed – right from the compressor to the lubricating oil,” he says. The company is developing a next-generation refrigerant that will help enhance efficiencies further.
It may be noted that the European Union has banned the use of the current refrigerant, R134a, for all new vehicle type approvals starting from the year 2011 to reduce the greenhouse gas impact of direct refrigerant emissions. Three alternatives are under consideration – R1234yf, R744 and R152a. Currently, R1234yf appears to be the refrigerant of choice for many OEMs since its refrigeration properties are similar to R134a.
Moreover, it is mildly flammable allowing use in a direct expansion system just as R134a is today. As a result, minimal HVAC modifications and no additional parts are required to achieve the required performance levels.
Launch pad India
Krishnakumar says the company made India as the launch pad for its new-generation advanced and compact heat exchangers for passenger cars. The product is slated for launch in the third quarter of 2011 and the India team will be the first to assess it and even suggest improvements. These will be possible with the team’s process capabilities. “The Bible for the product will be written in India for the rest of the world to follow,” he says. This global launch will be, for the first time in Delphi’s history, outside its home market. The prime reason, of course, is the market requirements and also due to the confidence of the team in building the capabilities.
But how does DTS manage to be cost competitive even in the most fiercely competitive markets? Krishnakumar is forthright: “We do more for less. Year over year we have at least two percent reduction in prices. In fact, in the first three years of production of most vehicle platforms, we have an about three percent price reduction in most contracts. You cannot offer price reductions unless you are constantly working on reducing cost. We do that by design, value analysis, value engineering, improvements in productivity and by just being smarter in managing overheads. We are constantly working on taking cost out of our business and products – to offer price reduction while maintaining margins. We spend a lot of time in the process technologies and also work with the supply chain."
In addition to new product development, the Indian team has also graduated to a level to support DTS’ process development capabilities elsewhere in the world. As part of this exercise, the company will soon be delegating an Indian engineer to a location in another country to work for at least two years to improve the capabilities of the facilities.
DTS has 18 plants worldwide but its Indian plant is unique. According to Krishnakumar, “it is the only place where the entire product offering caters to A and B segment passenger car platforms. Even in China, these segments account as a portion and not the whole of the business.”
In India DTS is located in Greater Noida where it has an engineering and manufacturing centre. It makes components for air-conditioning and powertrain cooling systems including radiators, condensers, HVAC modules and heat cores. Set up in 1997, its main focus is on localisation of engineering validation and manufacturing capabilities. It designs and supplies components and complete climate control systems for major leading OEMs in the country.
Customer profiles in India are also different as it has local players as well as multinational passenger car makers. While some of them operate on fixed requirements, others are flexible.
For DTS, the India programme is also paying dividends in terms of product quality. The quality of components sourced from India is improving quarter after quarter due to a comprehensive vendor development programme. “It is a continuously evolving situation and very dynamic. We used to import quite a lot of high-value parts from outside India but in the last month or so we have come close to getting final customer approval for localising some fairly complex parts,” says Krishnakumar.
Revealing information about future plans in India, he says, “We are at the cusp of a dramatic growth. The growth that we expect is not like the one that is followed by the industry, but will be significantly incremental to that of industry. We expect to achieve that by displacing some of our competitors which do not have our global scale and cost competitiveness. With the combination of global and Indian capabilities, we can address both the trends – western OEMs turning more cost conscious and the local OEMs beginning to focus on global quality standards.”
Currently the company is expanding capacity at its Noida plant. In some areas, it means an increment by upto three times. It is also working on vertical integration to improve the process capabilities there, which will help it contain import content over a period of time. The first phase of expansion will be completed in the last quarter of 2010 while the second phase, which will primarily be to displace imports, will be in production between middle to the end of next year. These projects will continue till 2013.
“We are investing in capacity in China where we have four plants with the mother plant in Shanghai. Also we are expanding capacity in Thailand and other South East Asian locations,” concludes Krishnakumar.