Magna eyes $200 million sourcing from India

The Canada-based $23 billion Magna International has big plans in store for India. It plans to set up at least two greenfield ventures here by 2008. Furthermore, the company that has begun sourcing automotive components from India is hopeful of procuring components worth more than $200 million from here over the next two to three years. Magna, which has a car mirror manufacturing venture with Lumax in North India, plans to set up at least one more such unit in South India to cater to its clients in that region. Also, it is keen to set up a manufacturing unit for powertrain-related parts soon in the country.

Earlier this year, Magna had set up a liaison office in India to actively help it identify business opportunities here. The company, which has a whopping $1 billion in cash reserves, expects to significantly increase its business out of the Asia-Pacific region. Globally, it hopes to achieve a turnover of $30 billion by 2010.This liaison office has identified a few companies in India that have the potential to be world-class suppliers.

To begin with, the company will be sourcing parts from a couple of component manufacturers including Pune-based JHS Taigene, owned by the Firodias, that makes transmission components. Magna is also in the process of launching a very technically challenging part for water pumps and oil pumps from the Caparo plant in Pithampura in Delhi. This year, Magna expects to purchase around $10 million worth of components from India.

“Going forward it could be more than $200 million in the next two to three years. We now have people who are working with us in sourcing as global purchasing functions and they are putting together data sheets of companies, compiling information on various Indian suppliers who are quality-registered, have good manufacturing practices and may be even exporting. We see a lot of potential for powertrains, for seating components etc. In stampings also we see Indian suppliers have a huge advantage,” says Prasen Agali, executive director - India, Magna International, India Liaison Office.

According to Agali, Magna International started the liaison office in India for the Indian market mainly to participate in the local automotive industry by bringing in new technologies and global standards, among other things. Also, he feels that a number of components, basically metal-based and globally-competitive, can be sourced out of India. “Probably there is around a 30 percent difference, for example, in the landed cost in Europe versus local suppliers,” he says.

In India, Magna has a manufacturing setup along with Lumax in Manesar, which makes car door mirrors. It has two engineering facilities also — Pune-based Magna Steyr and Bangalore-based Cosma. “With Magna being the world’s most diversified supplier of auto components, we have companies globally that are producing roof-tops, chassis frames, interior trim, seats, powertrain parts, door latches, window regulators, mirrors, electronics etc. In India we are starting with one programme this year and expanding with one more programme next year with Maruti Udyog. We are looking for a correct combination — if an opportunity does arise, we shall set up a plant in India,” he notes.

In 2007 he says his company will be supplying engine components to a few local OEMs. The company is also hopeful of increasing business with Maruti. At present it supplies door mirrors to India’s largest carmaker through its Lumax venture. As part of its growth strategy, Magna is also looking at facilities in the rest of Asia as well. In China it is setting up a 700,000-square-foot tool room and a stamping plant.

“We see a lot of potential of that business, for example, with relation to India. If we are to pick up a contract here in India to supply body parts, we can easily source tooling from a local supply base and if there is a higher technology or quality requirement then we can also bring in some other Magna groups to support us wherever they are located,” points out Agali.

##### The Magna Steyr unit, staffed by around 50 engineers who have been trained in Magna’s Graz plant in Austria, carries out entire vehicle assembly and engineering work. The unit is developing interior trim, powertrain solutions for customers in India and also European companies. Cosma, the company’s engineering unit in Bangalore, employs around 20 engineers who are currently working on overseas projects but as soon as the company picks up local projects, Agali expects them to use their skills on local contracts.

“In the next few years we could see at least a couple of greenfield ventures in India. We expect that we should be able to supply powertrain-related components to the Indian OEMs within one year. We hope to expand mirror-manufacturing capacities to cater to companies in the south and the west of the country. There is a huge trend in painted mirrors and it is difficult to transport such mirrors over long distances without the risk of some scratches coming. For that reason we may have to set up plants closer to our customers in those regions. We will surely have one mirror plant in the south while for powertrain activities both in the south and the west,” informs Agali.

VEHICLE ASSEMBLY AND ENGINEERING

Many companies which do not have a footprint in India and are keen to do so are now considering Magna Steyr as a viable option, says Agali. “We have the ability to implement the entire development process of a car, its entire engineering. Through Magna Steyr we can carry out components sourcing through our own group companies or the most competitive vendor base which is more economical for the project. We have the technical expertise to put up the manufacturing plants, paint shops, body shops, final assembly shops and also deliver the product. We know how it works. We have the intellectual capital to make it happen in short periods of time. We have a concept called Flex, developed at Graz in Austria, which can be put up anywhere in the world in a short time,” says Agali.

The Austria plant supports three or four OEMs. There are 10 different models that go through that facility every day and the customer range varies from BMW, GM and DaimlerChrysler. The quality requirements are managed meticulously, according to Agali. “It bagged a JD Power award for the best vehicle assembly plant. It means that the cars we are producing are of the best quality. We are looking at delivering similar services in India as well to our OEM customers.

"In Austria we make the BMW X3, a couple of Chrysler models like the Chrysler 300C, Mercedes-Benz E-Class four-wheel drive, Saab convertible and the Jeep Commander. Last year we built 240,000 vehicles there and we have a capacity of 260,000 units per annum. It’s a complete engineering and manufacturing plant in Graz, which is a two-hour drive from Vienna,” he notes.

Magna is in discussion with several OEMs in North America and in Asia-Pacific for a similar plant like the one in Graz. “We are talking with the big names in the region for making their vehicles. We have been nominated the paint shop operator for the Jeep plant in Toledo in Ohio. They have got a supplier concept where they have got two or three suppliers who do most of the work for the Chrysler plant and we are responsible there for the paint job.

"We are exploring the possibility of a similar operation with a couple of prospective customers and they are conducting their own study to understand what kind of solution is best for them. Also, many existing players in India and some foreign companies yet to come here — looking for extra capacities and also to minimise their investment — have evinced interest in our operations. We supply from simple components to entire vehicles,”