Parts powerhouse

He who knows does not speak, he who speaks, does not know. These thought-provoking words by Chinese philosopher Lao -Tzu clearly reflect the leadership as well as the ethos of the unassuming but excelling Sigma Group. Sigma Corporation India (SCIL), a part of the Sigma Group, is a leading manufacturer and if not a leader in the engine mounts and rubber components business here.

According to chairman Jagdip Singh who, in a rare and candid manner, spoke to Autocar Professional, said the company has held the status of ‘India’s No. 1 auto component export house’ for over 25 years — and that is what is also written on his business card. The fact that many within the industry perhaps do not even know that points to its low-profile ways. Sigma’s story is one of triumph — of a generation that lost a lucrative automotive products retail business in Pakistan during Partition, to selling automotive spares from a wooden shack in Delhi’s Kashmiri Gate to a now-flourishing, but low-key Group whose foundation was laid by Jagdip Singh’s entrepreneur father Santokh Singh.

History has it that a truck driver unhappy with the quality of engine mounts he was fitting on his Tata truck, and who used to buy spares from Singh's shop in Kashmiri Gate, requested the Sigma family to make some good quality parts. The family decided to identify an existing manufacturer and, since the former was already selling tyre treads, they took their own rubber to the manufacturer, explained the specifications and suggested a methodology. Finally, they got some 50-odd pieces made.

The components were approved by the truck driver and others in his profession. This inspired the Singh family to then set up their own engine mounts manufacturing entity from a 500-square-yard modest factory in Delhi in the early sixties. The company offered its customers a five-year guarantee for its parts as early as 1965. Singh says that the high quality of their products was a reflection of their entrepreneurial mindset to excel. In those days Sigma sold its engine mounts at the highest price in the aftermarket. While Sigma engine mounts were priced at Rs 18, Tata-made engine mounts were sold at Rs 12 and other locally-made mounts at six rupees.

THE FOREIGN CONNECTION

Singh, after completing his graduation from Delhi, was keen to explore an overseas career and embarked on a ship journey taking him to Tehran. He intended to stay awhile there and then take a three-day bus journey to Germany from Tehran. However, his friend persuaded him to stay back. Before leaving for Tehran, Singh was asked by his family to carry some samples of its engine mounts and explore the market for this component in the Iranian market. Singh decided to vigorously market the product and it gained reputation for its quality within four years of his stay. It has been around 30 years since Sigma quit doing business in the Iranian market due to the turmoil in the country, but he says that engine mounts are still sold in that market in the Sigma brandname packaging but obviously as counterfeits.

Emboldened by his success in Iran, Singh was keen to explore other markets abroad as well. So in 1973 he took part in the Internationale Automobil-Ausstellung exhibition. It was there that he met a leading German rubber component maker Kangol-Tekka through which Sigma established its business in Germany.

The German company was a leading rubber component manufacturer and supplier to the aftermarket in Germany but also supplied to some OE customers as well. Thus began a new chapter for Sigma as for the first time it started manufacturing products for a customer on the basis of product drawings it received from Kangol-Tekka. Sigma realised it needed to invest in a new plant which was eventually set up in Delhi’s GT Karnal area. The company set up its own laboratory and hired a number of rubber technologists. This facility became the family’s key manufacturer and supplier to the overseas aftermarket. The company also set up a few other factories in the area. By 1977-78, Sigma had also entered the US aftermarket.

##### The Singh family’s entrepreneurial ambitions were strengthened and in 1980 they decided to take the plunge and acquire Kangol-Tekka’s Wiesbaden-based 50,000 square-foot facility. This could be one of the rare instances of an Indian company buying an overseas manufacturing facility at that time. The acquisition was converted into a company in which Singh’s family owned 60 percent and offered 40 percent to Helmut Joest, a German professional with Kangol-Tekka, in return for his running the facility.

Apart from manufacturing and supplying rubber components in the 'Vibrastop' brandname at this facility, Sigma also supplied high-volume parts to its German company for further supply to customers. In 1982, Sigma bought India’s first rubber injection moulding machine from REP France to support its German company.

Singh says that through Sigma he wanted to be a flagbearer for India — in quality and reliability — via his company’s products. The company continued to grow its overseas aftermarket business strongly till towards the mid-1990s when Singh decided that it was also time to cater to the OE sector in a big way. But he realised that the family and its employees were too attuned to the aftermarket business to take a quick jump into the OE business and they lacked the technology that vehicle makers wanted as well.

He then began looking for a partner of renown with whom the Singh family could enter into a joint-venture. In 1994 they identified Hamburg-based Phoenix as a potential partner. Phoenix — one of the largest players in the NVH segment — did not hurry up and took its time to understand Sigma well and scout around in India in places like Madurai and Pune. Phoenix meticulously gauged and rated the companies it met. Finally it gave Sigma a higher rating than others.

In 1997 they both signed a joint-venture agreement and a new plant was set up in Mohali in a 50:50 equity sharing. Sigma Phoenix was later renamed Sigma Vibracoustic India (SVIL) after the family-owned Freudenberg Group of Germany bought over Phoenix's stake in their JV. Within a year since its formation, the first OE supplies of SVIL's NVH products were sent to Opel in Germany. While 75 percent of the company’s products are exported to customers such as BMW, Porsche, DaimlerChrysler, Ford and others, on the domestic front Tata Motors is the company’s largest customer. SVIL provides complete one-stop-shop services to its customers in NVH solutions in drivetrain, powertrain, chassis and suspension.

Meanwhile, Freudenberg was looking at setting up a seal components facility in India and the German parent’s chairman was visiting India to meet with potential partners for the project and had met with several companies in the country. He also visited SVIL and, according to Singh, was astounded with what he saw. Things clicked and a new JV called Sigma Freudenberg NOK (SFN) which consisted of Sigma, Freudenberg and NOK Corporation of Japan was formed. NOK was already a strong alliance partner of Freudenberg and both have been together for around 45 years. They jointly hold a global market share of over 75 percent in seal components.

Manesar-based Sigma Moulds & Stampings is another group company that was recently established. It makes moulds, tools, dies and precision sheet metal components and is building on its objective to be an OE supplier to companies in Europe, North America and Asia. The company is 100 percent owned by Sigma.

##### PARTNERS IN PROGRESS

Sigma’s foreign partners have been extremely happy with their Indian associate. So much so that as Singh revealed, Freudenberg-NOK has decided to make India its global manufacturing hub for two-wheeler seal components.

Around nine months ago, at a conference in Europe, a Freudenberg representative proudly presented a case study of their successful partnership in India. The presentation highlighted the following aspects of its Indian partner which were ascribed as “success factors” for a meaningful alliance: knowledge of country and culture, good relationship to local OEMs and suppliers, qualified and highly motivated management, high sensitivity for quality, international experience, family-owned company and long-term orientation. The second-last aspect bears special significance for Freudenberg as it is a family-run business itself and gives emphasis to certain core values. Among its guiding principles, which cover many areas (such as value for customers, innovation, leadership, etc), the one for people states: “As a family company, we are devoted to our employees’ well-being and personal development. We reject all forms of discrimination and harassment and show understanding and respect in our dealings with each other…”

The Sigma Group employees are known to have a high morale primarily because of the strong foundation of values of the Singh family as well as those of its partners. Despite being a family business, the Singh family has been able to maintain total professionalism in their businesses by exposing its young generation to the best business education, employing talented professionals and the family’s older generation gradually taking a hands-off approach. Singh says that he has stopped interfering in the day-to-day work of the Group companies and restricts his work to Board meetings and undertaking business trips.

He says, "I told my sons that I will give you both a helipad but you will have to get your own helicopters". The same goes for Singh's nephew whose father is also a part of the business. On the future of the aftermarket which has been the mainstay of the family’s business, Singh says that he had foreseen around 15 years ago that this market segment would shrink. Product lifecycles have increased, companies are offering longer-term warranties and technology of parts and vehicles have improved. To prepare for this eventuality, SCIL has been enlarging its customer and product range as well as foraying into emerging markets. Singh claims that SCIL anyway has the world’s largest product range in its segment for the aftermarket. This apart, the family could look at moving up the value chain and diversifying into parts distribution in the aftermarket through acquisitions in Europe and the US — an activity called ‘programme distribution’.

The companies are closely held between Singh’s family and the partners and so statistics pertaining to the Group’s sales are not in public domain. However, they believe that the Group’s sales would double in 2008-09. Sigma is an inspiration to India’s auto component industry that comprises largely of family-owned enterprises and the Singh family’s business practices could serve as valuable lessons for many struggling enterprises.