ACMA stares at a $14 billion opportunity

Indian component manufacturers, facing the impact of the slowdown in the auto sector, have a US $14 billion (Rs 91,336 crore) opportunity that they can leverage to their advantage, said Baba Kalyani, chairman and managing director of Pune-based Bharat Forge. The $14 billion he was referring to are imports of the automotive sector that are arguably costing it now especially in the context of the fall of the rupee.

He made these remarks during the concluding session of the 53rd ACMA annual conference in Delhi on September 5 that discussed the theme: ‘Achieving high performance in turbulent times – creating advantage from diversity’.



Kalyani elucidated on this themes saying that targeting this potential opportunity will also help the Indian component sector do more business in different geographies. He built up his argument saying that while Indian companies are good at relationships, the key aspect to focus on is people resources and having a highly skilled workforce is the need of the hour, and on that sub-stratum could one then build competencies to achieve global quality and process parameters. “Though we are good technocrats, we have not made the efforts to have a quality workforce,” he said.

Kalyani’s comments topped a session in which quality and cost controls, innovation, investment in technology and talent multi-skilling were themes that layered a host of top-class presentations. His comments basically provided more perspective to what the keynote speaker of the day, Dr PawanGoenka , head of the automotive and FES, Mahindra & Mahindra, said in which he said that the pursuit of quality has to be a 24x7/365 days-a-year project.



Need real-world vision and cutting-edge tech

In a debate termed as the ‘heart-to-heart’ chat with A K Taneja, past ACMA president and managing director of Shriram Pistons & Rings, Goenka emphasised that there has been no real cutting-edge technology in the country and that adequate investments have not been made in this area. Taneja said there is a need to define what an India brand is and that India has not been process-driven and disciplined enough.

Taneja also said that a vision is needed and that when expectations are raised, vendors are able to deliver the goods. He quoted the example of China where investments, costs resources and risks have been shared by OEs and vendors.

Another issue that came up was on whom lay the responsibility of upgrading Tier 2 and Tier 3 players and that was seen to be the task of OEMs in the first instance and then for Tier 1 to take on this mantle in the context of Tier 2.

Speakers at the annual session were categorical in that the slowdown offers players in the component sector the opportunity to examine internal cost structures, people productivity and the need to be more proactive in looking at the potential of international markets.

Every ‘crisis’ has an acronym and the one that was used to discuss both the Indian and global challenges was VUCA which stands for Volatility, Uncertainty, Complexity and Ambiguity. India, it was mentioned, is no longer decoupled from the world economy and that the return on investments is plateauing.

The HR issues that Kalyani referred to were also layered with perspectives on a company’s leadership and the role of a company’s promoters vis-a-vis the management. Without going into detail, the points that were mentioned were the need to develop a leadership pipeline and also have a best-in-class operating environment, among other things.

Sanjay Dawar, MD, Accenture Management Consulting India, said India is no longer de-coupled from the global economy and for auto parts makers in particular, the challenges include volatile input costs and uncertain international sales. He added that the PBT margin is falling in components and the return on investment has begun to plateau.

Overall, speakers emphasised the fact that Tier 1 players can help those down the line to upgrade both on skills and technology and where focusing on the longer term would pay dividends.

The head of a well-known components supplier to the commercial vehicle sector said vendors must use the slowdown as an opportunity to improve quality as well as internal processes as well as work in a better fashion with vendors. Anadi Sharma, head of marketing at GS Auto, said that the sector deals with real things referring to cars and the parts that go into them and hence the long-term view is unlike a stock market that goes up and down.

The ACMA conference could well be one of the few where a lot was said about the booming tractor sector that MallikaSrinivasan, chairperson and CEO of TAFE, said was a silver lining in the sector. She spoke about her own company’s efforts to help suppliers develop overseas business and also the growing acceptance of small, low horsepower tractors.

No session of this kind, and this was jam-packed, is without the personal touch. Karl Slym, MD of Tata Motors, spoke about the e-mails he sends suppliers every month "from my e-mail so that they can respond" and privacy and trust can be engendered. But what was perhaps far more important were Slym's significant comments that no longer could vendors to the commercial vehicle sector afford to operate in a cocoon as they had over the past many decades.



Call to turn adversity into an opportunity

Earlier in the day, inaugurating the session, Praful Patel, Union minister of Heavy Industries & Public Enterprises, said, “There is an urgent need for the automotive industry – auto components and the vehicle manufacturers – to work innovatively to turn this adversity into an opportunity.”

Acknowledging the need for immediate government intervention to sustain this important segment of the manufacturing industry, he said his ministry would provide all support to overcome the current challenge. “A stimulus package, on lines of that announced during the earlier 2009 downturn, is the need of the hour,” he said. It’s a comment he had also made a day earlier at the SIAM annual convention.

A year ago, who would have thought that the Indian rupee would lose 20 percent of its value and that business, particularly in the OE sector, would go through the slowdown. It is, however, an opportunity for players to focus on the soft skills that have not quite received the attention they so deserve.