Fiat Group gears up to source for new vehicle programmes

New Delhi-based Fiat Partecipazioni India, the group sourcing arm of Fiat, will commence the export of components for models to be launched from 2012. So far, the company has exported components that are primarily for the existing models as an additional source and also for the spare part requirements of the models that have ceased production.

According to Niraj Hans, managing director and country head, Fiat Partecipazioni India, this marks the beginning of Indian suppliers participating extensively in new vehicle programmes. “We have a Euro 50 million business of advance purchasing. Supplies will commence towards the end of 2011. Gradually, the business from resourcing will be replaced with advance purchasing,” he says.

When the sourcing operations began in 2006, Fiat imported an estimated Euro 25 million worth of components from India. In 2007, this figure increased to euro 45 million and to Euro 100 million in 2008. As a result of the recession, exports dropped to Euro 80 million in 2009 and it ended 2010 with about Euro 102 million. All these were on resourcing.

Purchase platform

Fiat Partecipazioni India was established in August 2009 to give the Group a platform for its purchasing activities. Prior to this, it sourced components from India under its different divisions (which Fiat calls sectors) – CNH, Iveco, Fiat Powertrain and Cars. The concept of group level purchasing began in 2007 under which all the sectors were merged with an objective of consolidating suppliers and retaining the good ones and those with the potential to show improvement on the required parameters.

Secondly, it was also done to leverage the benefits of bundling which is to make the purchases in one set of terms and conditions. The group level purchase is confined to exports while the requirements of Fiat companies in India are directly handled by the independent entities.

As Fiat Partecipazioni came into being in August 2009, 2010 was the first full year of operations. The sector-based approach has been converted to a commodity-based purchase under four verticals – metallic, mechanical, chemical and electrical. Therefore, each vertical head will now cater to all sectors of Fiat. Exports from India are classified into four major regions: Europe (Italy, Germany, France, Spain and Belgium), North America (mainly for CNH), South America (primarily for Iveco and components for cars and engines) and the rest of the world. In terms of variants, there is a lot of mix as there are four sectors, four commodity verticals and four classified regions.

Growing business

“We have moved away from conventional sourcing to a focused business approach looking at the overall value addition. What we dispatch from India is received by destination customers within the year. This is taken as the business generated in the year starting from January 1 to about November 15, taking into account the logistics aspects,” he says.

Elaborating the verticals, Hans says they include metallic covers, sheet metal and machined parts while the mechanical vertical handles castings and transmission components. The chemical vertical comprises plastics, rubber and glass and electrical vertical includes the entire auto electrical range.

“We began with several powertrain components including pistons, piston pins, rings, crankshaft and camshafts that are traditionally India’s strength. India is good at components that are technology-intensive and precision components and our business was confined to these parts. However, in 2010, we tried to get into chemical and electrical commodities and started sourcing plastic, rubber and electrical components. Currently, about 80 percent of the business is in metallic and mechanical commodities and the rest come for the other two verticals,” he says.

So far, Fiat Partecipazioni India has focused on catering to the requirements of existing models and spare parts. The challenge is to cater to new programme requirements and the company hopes to see its efforts bear fruit from end-2011 onwards. This is because it takes close to a year for development, approval and validation. “Due to success in previous sourcing projects, there is a positive perception about the Indian supplier base. The validation process has got faster,” he says.

Of the components sourced by Fiat worldwide, India's contribution was up to 30 percent of the requirement with the rest supplied by vendors based in Europe. India’s share has gradually increased to 50 percent. From 2010 onwards, Fiat Partecipazioni India began getting business for new models too and Hans says this development reflects the increasing confidence levels in Indian suppliers.