Tier 1 supplier sets up all-new plant in Chennai and banks on localisation to supply air and fuel filters to commercial vehicle majors in India.
In a typical case of a Tier 1 supplier following OEMs to their newly-built manufacturing facility, global motion and control products manufacturer Parker Hannifin Corporation has set up a greenfield state-of-the-art manufacturing facility at the Mahindra World City near Chennai. This new manufacturing plant has begun production for the company’s Filtration, Drives & Electromechanical, Seals & Sealing businesses. The localisation of these products will be a major step forward towards furthering its India growth gameplan.
The facility, built at a cost of Rs 100 crore, will mainly supply filter products to Daimler India Commercial Vehicles (DICV), Volvo-Eicher Commercial Vehicles (VECV) and MAN Trucks India.
The Ohio-based company has already made “long-term commitments” with both DICV and Volvo Trucks and Buses India to supply air and fuel filters. While the Chennai facility will manufacture and supply air and fuel filters to DICV for use in both the Light Duty (LD) and Heavy Duty (HD) trucks of the BharatBenz range, Parker Hannifin India will also supply fuel filters that meet Euro 6 emission norms to Volvo in Bangalore.
As the manufacturing facility has been set up in the domestic zone of the Mahindra World City, the facility is not allowed to export any of its wares.
“Volvo, for instance, has a new engine program with one product group for the emerging markets and one for Euro 6 markets. We’ve got their contracts for both the type of engines. We’re chasing other opportunities. For BharatBenz’s HDT and LDT trucks, we supply the fuel filters. It’s a four-to-five-year program.
All our manufacturing and production is based on the contract and the forecast they give in the Statement of Purpose,” says Kiran Kagalkar, country sales director. Asked if any talks are on to source more orders, Kagalkar remarks that Parker Hannifin is in talks with most major CV manufacturers in the country. “We have a foot in the door when it comes to MAN and AMW as we supply to them globally,” adds Arijit Sen, country managing director. Sen goes on to say that by simply mentioning that his parent company was setting up a manufacturing facility, “request for quotes have tripled.”
Big is better
Parker Hannifin, however, will not enter the passenger car segment. “We do not have the technologies to cater to that market,” admits Kagalkar. “We have technologies only for bigger engines. I’d say the base output has to be at least 100bhp,” he adds. Apart from various domestic truck and bus OEMs, the company is also in talks with engine manufacturers. “We already supply to Cummins, Simpsons and Caterpillar. We are in talks with more manufacturers,” reveals Kagalkar.
The Rs 71,500 crore ($13 billion) company will also manufacture fuel lines, fuel conveyance products, pneumatic door closers for bus and metro trains from its facility in Chennai, apart from drives, seals, O-rings and shielding products, and cater to other industries like off-highway mobile, telecom, oil and gas, mining and primary metals.
On an acquisition spree
The previous year has seen the American company acquire smaller companies on a war footing, with five acquisitions in the last 16 months. To boost its existing filtration technology in India, Parker Hannifin acquired the filtration business of John Fowler (India) based in Bangalore and the Indian filtration division of the UK-based Dominick Hunter Group. Apart from these, Parker Hannifin also acquired hydraulics manufacturer Olaer Group, which included Olaer’s facility in India.
“Acquisitions have always been a way of conducting our business,” says Thomas Williams, executive vice-president and operating officer, Parker Hannifin Corporation.
“Our aim is to achieve five percent of our total revenue from our acquisitions every year. In 2012, we managed to make around Rs 2,200 crore from our acquisitions, which still fell short of our five percent target,” he adds.
Williams goes on to reveal that he plans to double the company’s sales in Asia Pacific over the next five years. “Asia represents approximately 10 percent of our sales today, but over time we would expect that to be as much as 20 percent as our target is to double our business in the region over the next several years. A significant portion of our growth efforts in the region will be focused on India, as this country will play a critical role in our success
in achieving these goals,”
he states, adding that in two-three years’ time, the newly established manufacturing facility in Chennai has the potential to become the largest revenue contributor in India.
The greenfield facility in Chennai has utilised just about half the total land bought by Parker Hannifin India. With space left to expand for about 80,000 square feet on top of the current 100,000 square feet, the company also looks to add, in the next two to three years, close to 300 employees to its current 165-member workforce.