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M. Ramesh

Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners Ltd.

CHENNAI, Oct. 20

FIVE times `General Motors Best Supplier of the Year Award winner', Sundram Fasteners Ltd, is today an equation of some pluses and some minuses. On the positive side, the company has been able to derive support from the overseas market to beat the recession. It is getting into hot forged products. Generally, matters are looking up. On the negative, the GM success has not translated into more business, either from GM or others. Its acquisition of Autolec Industries hasn't begun to pay back. And the new hot forged plant has been having some trouble in getting all the clearances from the Pondicherry Government. What is in store for the company in the near future? What is the long-term vision?

Sundram Fasteners' Chairman and Managing Director, Mr Suresh Krishna, spoke to Business Line about these issues. Excerpts from the interview:

How's the auto component industry looking today?

It is looking better. The thing that is carrying the component industry is the 2-wheeler industry. That is really doing very well. Commercial Vehicles - keeps going up and down. Cars (manufacturers), as far as Sundram Fasteners is concerned, they are not indigenising fast enough. Lot of these people consider fasteners C category items. But exports are growing well.

We feel that the outsourcing movement in exports is beginning to gather steam for two reasons. One, there are a lot of cost pressures in USA and Europe. Second people are beginning to feel comfortable with the concept of outsourcing. Earlier, Americans bought from within America, Europeans from Europe. Now at least the more progressive companies are looking to China and India. They will probably not buy very sophisticated items. But where the product is reasonably constant, and it is not so vital to the car, then they are prepared to look at either China or India.

But we are not marketing ourselves. I personally feel if you had encouraged FDI in the auto-component industry in a large way, the industry would have exported more.

How are we doing vis-à-vis China?

China is a really growing market for the automotive industry. India makes four million motorcycles, China makes 10-12 million, we make some 1,00,000 trucks, they make around 8,00,000 trucks. They are growing very fast. And they've more or less taken care of infrastructure. They may not be very good in sophisticated engineering; they do not have a big trained manpower. They've a big problem in trained managerial excellence. But they seem to make up for all that by the right kind of noises that they make. India has to catch the rest of the world's imagination. Look at labour laws-in China they can hire or fire anybody. In India, we've just been talking about it for over 10 years.

In future, it is going to be competition between India and China, but China is already way ahead of us. Also, in the next five years or so, the Chinese will completely upgrade their knowledge of making engineering products.

You have already taken a step in China, setting up an office in Shanghai. When will it graduate to a manufacturing unit?

Let's see. We're now studying the Chinese market. We are supplying (to Cummins, China) through the Shanghai office. I don't want to jump into market without studying it properly.

How are you doing on the export front?

We're doing well. Much better growth pattern, better than last year. No breakthroughs. We're stepping up our supplies to Cummins, USA. We are supplying more to China and Japan. Exports are growing, generally.

Sundram Fasteners is a five times winner of the General Motors Best Supplier of the Year Award. When will you see GM beginning to buy other products from you?

General Motors is a huge organisation with many people. Each person's perception of what they should be doing for cutting costs is different. Some people might think that outsourcing from India is very good some others may think that it is not. I've met people who say, why do you want to buy from India, we can buy the same thing in Indiana. America hasn't really stepped out in a big way into Asia. There is no use pushing this in a big way, because there is a lot of inertia in big organisations.

What about other big customers in the US?

The same logic applies. First of all, they must feel the pressure to reduce costs. Then you must present yourself at the right time at the right place. Then it clicks. That's how we got Cummins.

What volumes are you supplying to Cummins, USA?

Not very big, but now we are getting regular orders for Autolec also. (Autolec Industries, a subsidiary of Sundram Fasteners, produces water and fuel pumps.)

Coming to the domestic market, your tax holiday for the radiator caps division has expired. What are you going to do about it?

Pay tax, like a good citizen (laughs). I'm not going to put up huge investments just for the sake of saving tax. That made sense when taxes were 60-70 per cent. Today, we're among the lowest in the world. I'm not going to invest for depreciation. I'll invest only if it makes business sense. I've now put up a forging plant in Pondicherry, that'll get tax holiday.

What is the rationale behind the forgings plant at Pondicherry? (SFL has invested around Rs 15 crore in the plant.)

Well, in Hosur we've a cold forging plant. Now we are getting into hot forged products. There is a lot of demand within India and outside India for forged parts. We just want to cover the entire technology. It's tool making technology primarily and our core competence is tool making. All the primary conversion of metals like castings and forgings and products like fasteners and rubber parts, are the first ones that would get vacated out of US and Europe. We're gearing ourselves for that. It's certainly not going to happen next January, no. It certainly will happen in the next 10 years.

How is Autolec doing now?

It is doing better now. The automotive industry itself went through a recession in the last two years, but I think we are coming out of it. Last six months have been good.

Looking back, do you think it was a good acquisition?

I think it is a good acquisition; it (Autolec Industries) has got a tremendous future. I don't look at what the company is today. I look at the long-term prospects.

Would you merge Autolec with SFL?

It is not even in my radar screen.

You've spoken of the possibility of making acquisitions abroad. Anything in the offing now?

We've tried once or twice, didn't come through. We've gone a little cold on the Western hemisphere. We've an Autolec plant in Malaysia. We're trying to strengthen that and see whether we can do something in the Asean market. If at all we do any acquisition, it will be in the Eastern markets.

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