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CHENNAI, Sept. 25

THE original equipment manufacturers (OEMs) in the US and Europe, particularly Germany, will be forced to outsource their component requirement due to cost compulsions and this presents an opportunity for the Indian component manufacturers, according to Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners Ltd.

Addressing shareholders at the company's annual general meeting and later in an informal chat with newspersons here today; he said that the OEMs would initially be hesitant to outsource their requirement from developing nations. But, cost compulsions would force them to look at low-cost production centres for their requirement. The component industry in both India and China would benefit because of this, he said.

Mr Suresh Krishna pointed out that the component industry was concentrating increasingly on the export market, especially with sluggish domestic offtake. He said that the domestic automobile market, except for the two-wheeler segment, continued to be dull. Component manufacturers continued to face pressure on both price and margins because the OEMs were keen on price reduction.

Despite the market conditions, he was optimistic about the company's performance this year with a reasonable growth in sales. Exports were good and the company expected at least a 10 per cent growth in export sales for the year.

Mr Suresh Krishna said that Sundram Fasteners had set up a sales office in China and had also commenced exports of fasteners to OEMs in China. The Pondicherry plant had commenced production and it would concentrate on the two-wheeler segment.

The company continued to pursue cost reduction. Towards this, it had almost completely shifted to indigenous raw materials. Sundram Fasteners used almost 40,000-45,000 tonnes per year of raw materials.

Answering shareholders' queries, Mr Suresh Krishna said that Autolec Industries, which Sundram Fasteners acquired, had made a profit last year. The management would focus on exports to further improve Autolec's performance.

He told a shareholder that the company was not interested in acquiring Dev Fasteners as Sundram Fasteners itself had the required capacity. Company officials later told newspersons that some informal enquiries had come in, but Sundram Fasteners was not keen on taking over Dev Fasteners as its liabilities were enormous.

Mr Suresh Krishna said that the company would continue to explore various options. In this regard it had looked at the possibility of taking over a radiator cap manufacturing plant in the US, but was not successful.

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