Microsoft Power Point - Seminar IIT Kharagpur 2005 Jan

8/6/2019 Microsoft Power Point - Seminar IIT Kharagpur 2005 Jan

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Third International Conference OnGlobalisation & Competitiveness

Globalization and recipe for Competitiveness

of Indian Auto Component Industry.

Dr Vasant Khisty


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Introduction Vasant .P.Khisty

Employed with Fairfield Mfg. USA Working as V.P.International Business Experience in Auto Industry-24 yrs

Certified Auditor for ISO9000, ISO 14000,QS9000

Doctorate from Pune UniversityAuthored( How to be exclusive and

maximise your returns)


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Presentation Overview

Introduction To Auto Industry

Globalization, Its Opportunities and challenges for Indian AutoIndustryStrength , and concerns of IndustryNeed for competitiveness

Evaluation of competitiveness of Auto component manufacturersEvaluation of Industry AssociationsEvaluation of Government Auto related policiesFindingsRecommendations


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Introduction

Auto Industry/Auto component Industry


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1769 First, true automobile, a steam lorry designed by Nicole -Joseph Cugnot.

1801World s First Passenger carrying vehicle, built by Richard Trevithick in the U.K.

1984 Karl Benz builds worlds two seater Tricyle powered by Four-stroke petroleum engine.

1902 Ford Motor Company formed

1908 Ford pioneers first moving assembly line with Model T ford.

1925 Mercedes and Benz companies merge.

1938 Volks wagon Beetle enters production.

1958 Mini small car launched in Britain.

1961 Jaguar car s produces first 150 mph car.

1872 Sales of VW Beatle reach 15 million.

1986 Toyota of Japan overtakes VW.

1994 BMW of Germany acquires Rovers group in worlds largest Industrial merger.1998 Diamler Benz Acquires Chrysler Corporation.

2000 BMW breaks away from Rover group, GM acquires 20% of Fiat, and Ford buys LandRover.

2001 Profit warnings at Ford, Renault, Volvo, Daimler Chrysler, Fiat, Delphi, and Visteon.

2002 Major restructuring launched by Big three US carmakers.

Future Prediction, Disintegration and Emergence of Asian Companies . Telco currently18 th to grow to 14 th Rank

Evolution of Auto Industry


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Country wise share of global car manufacture.

W-Europe30.6%E-Europe 5.1%

Australia 0.7%

Asia 24.8%

India 1.29%

latinAmerica2.9%South Africa0.4%USA 33.9%


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The auto industry employs six lakh families.

Revenue generation for government is over Rs. 25,000 crores .

There are several auto manufacturers with a combined turnover of Rs. 25,000

crores )

The Evolution of Auto Industry -Indian

1925-GM India Ltd started assembly of Trucks and Cars

1930-Ford Motor started assembly of CKD

1956-Activity terminated due to restriction of Foreign exchange for imports

1970-75- Slow down in Auto Industry

1975- 26 new Automobile firm registered

1980-Growth in Industry, import of capital goods and components permitted

-Japanese JV in LCV and two wheeler.

1991-95-Gulf war and recession

1993-Auto Industry liberalised, license abolished, new JVs in component Industry


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Statistics- Indian Auto Component Industry

Local Demand met by Componentindustry 97%Large and Medium Sized firm Over350Small scale ancillary Units-6000Total production 30,000 Crs RsForeign Collaboration-322Japan-92Germany-55USA-38UK-35

Investments around 7000 Million US$Employment 250,000 Direct.

Global Share-2%


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Percentage Component production Mix

32%

20%

17%

16%

8%

Engine Parts

Others

Drive , Transmission,Steering

Suspension braking

Electrical

Engine Parts-Others- Drive , Transmission, Steering-- Suspension Braking -- Electrical32% 20% 17% 16% 8 %


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Auto component investment(U.S. $ million. as on 31st March2001)

0

1000

2000

3000

4000

96 97 98 99 2000 2001 2002 2004

310031002645264523002300238323832000200018501850181318131705170513151315

20042004200320032002200220012001200020009999989897979696


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: Auto component production (Value In U.S. $ million.)

0

2000

4000

6000

8000

95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04

6730673054305430447044703804380432503250300030003278327825882588

0303 --04040202 --03030101 --02020000 --01019898 --99999797 --98989696 --97979595 --9696


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Auto component exports (U.S. $ mln.).

0

200

400

600

800

1000

1200

95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04

10001000760760578578387387350350330330291291267267

0303 --04040202 --03030101 --02020000 --01019898 --99999797 --98989696 --97979595 --9696


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Figure-10: Automotive export Destination 2000.

EuropeAsia

Africa

USA

Others

Europe Asia Africa USA Others

36% 16% 13% 27% 8%


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GLOBALISATION

Globalisation is an economic phenomenon, involving the increasinginteraction, or integration, of national economic systems through thegrowth in international trade, investment and capital flows.


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MAIN FEATURES OF INDUSTRIAL GLOBALIZATION

a) The unprecedented increase in competition between firmsin different markets

b) Second feature of global competitiveness is theinternationalization of production.

c) A third feature has to do with the pattern of international

trade.d) A fourth feature is the growing interdependence between

the various levels of globalisation, namely direct

investment, trade, transfers of technology and capitaltransfers.


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Opportunity for Auto Industry in Globalised Economy

Worlds one of the most favoured source for Auto components

Indian Car manufacturer poised to be Global players. E.g Scorpio,Indica

15 car makers have out sourcing office in India

Combined budget 1.5 billion us $

90 Indian firms upgraded to Tier I status

Two firms awarded Deming award (only 5 in the world)

Export up from 450 million in 2000 to 800 million US$ in 2003

30% growth expected in current year

$2.5 billion by 2010

Experts feel it would grow to 25 billion $ by 2010.


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Why This Opportunity

Overall slow down and large scale bankruptcies

The three Global giants are loosing money

European market has flattened out

Japanese market has shrunk

This puts cost pressure on manufacturers

India offers them 15-20% cheaper parts at low volume andequivalent quality.


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Auto component Industry-Globalization and Challenges

Turnover worldwide is concentrated with few firms. The top thirty global firms accountfor over fifty per cent of component industry.

As the Original Equipment Manufacturers (OEMS) move production to match markets;they are taking their key suppliers with them.

OEMS are moving towards modular manufacturing

The Component Industry will be dominated by Mega suppliers having four characteristics

A. They will have entire Global coverage( Delphi , Visteon)B. They will have huge research and development capability( Robert Bosch)C. They will have a critical mass of $ Three to Four million in revenue

D. They will be suppliers of complete systems.

This will result into elimination of Component manufacturers whowill not gear up to compete with these Giants and give total Monopol

To mega suppliers forcing Indian OEMS to buy at a higher cost.


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Responsibilities SuppliersOEMs

Product Planning/Maketting

R&D

Design ,Engineering &Testing

Quality

Pragramme management

Supply chain management

Manufacturing

After Sales activity(Warranty)

Environmental performance

Responsibility Transition


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Strength Component Industry

Cost Competitiveness

The Indian component Industry is on an average 20% to 30% cheaper thanJapanese supplier despite lower productivity.

Profit 5%

Over heads andothers 20%

Depreciation 4%Labour 32%

Material andcapital 30%

Profit 10-12%Over heads andothers 15-18%Depreciation 5-8%

Material andcapital 55 to 60%

Labour 8to 10%

Cost is low despite the fact that the productivity is50%to 75%lower than International standard


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CONCERNS OF COMPONENT INDUSTRY

Small Size by global standardsFinancial standing of Auto component Manufacturers

400 firms in organised sector75% of sales

5000firms inUnorganised sector

25%of sales

Mostly to aftermarket

17 firms sales >$40 M

155 firmsSales between 5 40 m$

180firms sales


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Rejected parts per million (PPM).

0

500

1000

1500

2000

2500

Global best

qualitycompanies

Global low

qualitycompanies

European

average

Japanese

average

Leading Indian

Firms

Poor Quality Of parts and Services

Inferior Technological capabilities Lower competitiveness due to non tired structure Higher cost of Finance In IndiaHigher cost of LogisticsHigh cost of raw material


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Partners Responsible for Industrycompetitiveness

The Auto component manufacturer

The Industry association

The Government (policies)


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Individuals , Organisations, Industries,Associations , Countries

which are can only Surviveand flourish in the Globalised Economy.

Competitive


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GAP ANALYSIS AUTOCOMPONENT MANUFACTURERS


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Findings And Recommendations

Business Strategy -Rating :65%

Strategic alliance / Joint VenturesCutting edge strategyAllocation of corporate capital fairly

Product development- Rating:27%

Involvement of customers in product development

Poor capability assessment of new inquiriesVirtual prototyping for process and product design


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Manufacturing capability-Rating:61%

Lean ManufacturingSix SigmaKaizenToyota Production System

Quality Assurance -Rating:40%

Implementation of QS9000

Implementation of TS14969

Implementation of six sigma


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Supply chain management-Rating :50%

MRP systems Global sourcing initiative

Human Resource management-Rating:25%

Action Learning

Making rewards and recognition a wholesome experience

Performance appraisal

Flexibility

Finding and keeping Top Talent

Investing in Spiritual Capital

Managing Intellectual capital

Organisational Environment Survey


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Information systems-38%

Enterprise Information systems

Exploring future Business opportunities-40%

Business research

Market research


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Industry Associations-An Evaluation

Structure of Associations :

Confederation of Indian Industry CII is the apex body for Indian industries ingeneral.

Society of Indian Automobile Manufacturers SIAM represents the Indianautomobile manufacturers.

ACMA spelt, as The auto component manufacturers association is theassociation, which represents the auto component manufacturers in India.


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Recommendations for Industry Associations:

1. Resource Sharing2. Lobbying with Government3. Technological improvements4. Educational Institutes

(National Institute of Global Competitiveness)

5. Develop volume based supply chain6. Leverage Knowledge7. Low cost virtual association8. Facilitate and manage focused growth of clusters

9. Facilitate Infrastructural development


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Evaluation Government Policies

A t P li 2002


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Vision and Policy Objectives

(i) Exalt the sector as a lever of industrial growth and employment and toachieve a high degree of value addition in the country.

(ii) Promote a globally competitive automotive industry and emerge as a global

source for auto components.

(iii) Establish an international hub for manufacturing small, affordable passengercars and a key center for manufacturing tractors and two-wheelers in the world

(iv) Ensure a balanced transition to open trade at a minimal risk to the Indianeconomy and local industry.

(v) Induce modernization of the industry and facilitate indigenous design,research and development.

(vi) Steer India's software industry into automotive technology.

(vii) Assist development of vehicles propelled by alternate energy sources

(viii)Development of domestic safety and environmental standards at par withinternational standards.

Auto Policy-2002

Fi di


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Findings

1.China announced Auto policy in 1994 where as India in 20022. More stress on analysis of current status and less emphasis onnew measures

3. Policy Lacks objectiveness and transparency

4. More focus on small cars neglecting other segments

5. No incentive for foreign Investors

6. Neglected Tierisation process

7. No focus on Global opportunities

8. Policy not focusing on Auto components

The most important needs of Global customers are:


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The most important needs of Global customers are:

higher value for money

regular cost reduction

customer focus

world class products made on world class equipment

just in time supplies

flexibility in supplies

small batch sizes

Ethical business practices

cordial labour relations ships

friendly business interaction

E-Compatibility


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Final Recommendations

A

D EF Tier 1

Tier 2

Tier 3

Auto Manufacturers

Parts

Sub-assembl y

Modules/Systems

A EDCB F

AA

B B

A

BB

Proposed Model for Global Competitiveness


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F I R M S

Environment+ve

-veGovernment Policies

LE

ADERSHIp

Industry Association- Facilitatorfacilitators

Proposed Model for Global Competitiveness


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Govt

Education

Associatio ns R&D

Firms

Global Resource and Knowledge Integration

Competitiveness comes through the ability to collaborate andnetwork resources and

competencies across the world


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Task force Structure

Task force

R &DUnivesities

NationalInstitute

OfCompetitiveness

IndustryAssociations

Ministry of IndustryFinance , commerce, etc

Financial institutes

Repre sentation

InternationalConsultants/

Advisor

Industry Stalwarts

S up po rt

FIRMS

In the current knowledge society competitiveness would be derivedfrom the ability to reorganise and integrate all form of knowledge

leading to innovation in every area of human endeavor.


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Summary

There needs to be a serious and an integrated approach from the government,associations and the firms manufacturing auto components.

In order to chanelise the efforts a task force is needed. The task force shoulddevelop a blue print for all the three participants and monitor their progress. Acertain degree of empowerment should be provided to this autonomous body.The task force should formulate strategies and should carry outcompetitiveness assessment periodically to assess the effectiveness of thestrategies.

At firm, level researcher strongly recommends that the componentmanufacturers should go up the value chain and evolve into module/systemsupplier in order to exist and prosper.

Formalise Ministry for Global competitiveness and develop National Institute ofGlobal competitiveness, which will provide service , advice and control.

Overall, a very encouraging future is anticipated for the firms with proactiveleadership.


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ThanksThanksNo research is ever quite complete. It is the glory of a good bit of work that it opens the way for something still better, and this

repeatedly leads to its own eclipse --Mervin Gordon

Documents

Microsoft Power Point - Seminar IIT Kharagpur 2005 Jan