German partners are leaving no stone unturned in their operations here, says Taarun Dalaya, analysing Sigma Vibracoustic’s new facility in Mohali.
SVIL began production here a few months ago and 75 percent of its production is already going to customers in the developed world for fitment on contemporary, high technology vehicles like Porsche’s Cayenne, VW’s Touareg and Audi’s Q 7. The management, foreseeing more growth in demand, feels that the capacities of this new plant may not be enough in the next five years!
SVIL is a 50:50 joint venture with the German Vibracoustic company that is part of the 4.8 billion euro Freudenberg Group and among Germany’s biggest family-owned businesses. The chairman of Vibracoustic GmbH & Co. (Sigma’s partner) Reinhard Schutz, told Autocar Professional that when they started out in India a few years ago they were looking at a turnover of 50 million deutsche marks and three years from now they are looking at achieving a turnover of 30 million euros “which is four times since they began”.
Schutz, hence, attaches tremendous importance to his partnership in India and, though the Indian operations are more export-oriented and will aspire to have a large network of customers in North America and Europe, he says that his first focus is the Indian market. He would eventually like to see a balance. The chairman of Sigma India and Vibracoustic’s Indian partner, Jagdip Singh adds that most OEMs barring Maruti and Hyundai are SVIL’s customers.
He is very excited about the ambitious plans of the Tatas to become a high volume producer of the small car that would be most inexpensively priced compared to others in the market. He is of the opinion that SVIL is the largest manufacturer in India in its products. One reason why the company has been very successful, according to Schutz, is that while most foreign companies were relocating their plant equipment and machinery to low cost countries for new operations there, Vibracoustic has, from day one, put in the newest and best machinery for its India operations.
He thinks that the new SVIL plant could stand a chance of becoming a benchmark for Vibracoustic worldwide “once we bring this plant to compete with newest production knowhow”. Member of Freudenberg’s management board, Martin Stark says that what will define a benchmark plant would be a “zero-defect” facility. “This really means that there is no defect in all the stages of your production. It has to be stable in all processes. And this is the real challenge,” he says.
##### According to him, when the older facility of SVIL started there was a lot of room for improvement in areas such as workflow, product flow and cleanliness. "Today, these are in place and everything is in a good structure, the material flow from the planning point of view is well-designed and we now have to analyse and look whether the quality is stable and can be improved,” he says.
When you enter the new facility one notices new machines, new tools, highly-skilled workers but the important thing to be seen, Stark says, is can all these things put together deliver what the market wants? Vibracoustic’s self-determined PPM levels are 50 and this, observes Schutz, is competitive but confesses that the level is unsatisfactory for them. He however says that attaining zero-defect is the real secret of staying ahead.
OEMs worldwide have warranty costs in the range of between four and five percent which, when compared to the overall turnover and considering the bottomlines it erodes, is a lot. OEMs have, hence, been wanting their suppliers to also take responsibilities which get translated into signing really expensive warranty agreements with them. “So when we talk of benchmark plants in future these are without any doubt zero-defect plants. A plant which can supply with zero-defect within the Vibracoustic alliance will be called a benchmark plant,” Schutz says.
“We convert noise and vibration into sound and comfort” is the slogan that Vibracoustic uses to propagate its expertise that is obviously driven by strides in technological development through the work of its engineers every day. On being asked if Vibracoustic was (as is the case with many MNCs that have set up shop in India) looking at using Indian manpower for design and development, Schutz said that they often discuss it among themselves in Germany. They also get to read about the huge turnout of engineers in India but ironically even the shortage of talent.
“From my point of view, yes we still have this in mind, but before we do it we have to do a serious analysis of the human resources for our purpose. From our viewpoint, Chandigarh is an apt location for manufacturing but the question is that is there enough of a pool of such people here to go into technology development?”
##### ABUNDANT TALENT
Singh adds that they are fortunate to have two of India’s top-level engineering colleges in the region. One of them is the Punjab Engineering College in Chandigarh and the other is the Thapar Institute of Technology in Haryana. He does not feel that there is a shortage of mechanical engineers but if one looks at specific talent like design engineers then there is a dearth. “Sigma had sent two engineers to Germany where they trained for two years. We are now going to use them in setting up a design centre here. And we will send more and more engineers as we grow in our business,” he says.
Can they not consider relocating a design and development outfit elsewhere in India then? Stark says a definite “no” and elaborates that locating a design and development centre elsewhere in India than Chandigarh is not acceptable to them. Vibracoustic’s basic idea (and also for the rest of the Freudenberg Group) is that engineering should be close to production because if products were needed to be analysed then one would have to look at production processes to determine whether engineering did something wrong. “Therefore our bible tells us do engineering close to production so that they can see what they are producing in real life”, Stark says.
Besides Vibracoustic and its products, the Freudenberg Group also possesses other businesses dealing in non-woven materials, seals, household products, and chemicals, among others. In 2005 the contribution of its businesses in Asia to its overall turnover was 343 million euros. Stark sees major growth opportunities coming for the group from Asia including China, Japan and Southeast Asia.
“The group’s sales have been growing by more than 10 per cent in Asia and worldwide we expect growth of seven per cent for the whole group,” he says. Freudenberg’s other automotive businesses in India include a seals and precision moulded parts operation along with its long-time Japanese partner NOK and with Sigma.
For its non-woven filters and air intake filters it does not intend to have manufacturing operations here because it already has operations with large capacities in Europe which need to be fully utilised. However, according to Stark, the group does want to look at investing in other areas such as making mechanical seals for general industrial utility. Freudenberg is evidently very happy with its Indian partners – the Singh family – with whom, Stark says, cooperation was made on the basis of mutual trust.
Being a family-owned group themselves and understanding the unique core values that intertwine the fabric on which they are based, Freudenberg preferred to form a partnership with Sigma than with a public traded company where, according to Stark, “the CEO is always changing”. “We base our cooperation on the entrepreneurship of our partner because Freudenberg is an entrepreneur spirit-based group itself. We found this in the Singh family. “They are constantly thinking about the next step to take the business forward. In the Singh family we have found what fits 100 per cent with the guidelines of the Freudenberg group,” he adds.
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