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2010 CONFERENCE REPORT
             
People are the challenge to growth

Human factor emerges as key in blockbuster market expansion

TECH WORKSHOPS

CHENNAI, 9 DECEMBER 2010:  Retaining employees has emerged as the biggest challenge in what Ford India’s president, Michael Boneham, described to the AMS India conference as ‘blockbuster times’ for the automotive sector.

Speaker after speaker, and continuing in discussions outside the conference hall, highlighted the fact that the country’s demographic bonus, which was helping drive GDP growth and so car sales, was also producing a generation whose expectations were running ahead of employers’ ability to deliver.

The third AMS India conference, which has just closed, saw more than 300 automotive executives from across India and around the world gather in Chennai for high-level presentations and discussions. Plenary conference sessions were complemented by a series of 15 technology workshops, at which OEMs and equipment suppliers got to grips with a market which has topped two million passenger vehicle sales in 2010, and will pass three million by 2015. See index (right) for reports from each of the workshops

Fabulous times

“These are fabulous times for us automotive professionals,” admitted Sarangarajan Thathipillai, assistant vice president of Hyundai India. But he added that, despite India’s unrivalled output of young and educated new employees, “after a few years productivity and motivation drops dramatically”. 

Ford's Boneham: Young Indians want to be promoted quickly or they will leave 


“If they are not presidents or managing directors in four years, they’re off,” quipped Boneham during his keynote presentation, only partly in jest. “The requirement on us as senior leaders to retain the young people is more and more challenging,” he added, noting that many first-jobbers in India are starting on wage levels at which their parents retired.  

Half of India’s population is under 25 years old (the country’s average age is 24.6 years), and this is behind predictions that India’s car market could reach 20 million sales per annum by 2030. The demographic profile means that India’s population requires less healthcare, has fewer retirees, works harder and has more to spend than anywhere else in the world.

The downside of this, said Thathipillai, was the need to formulate a strategy that would see cars “capture the imagination of the iPAD generation”of young people, some of whom consider vehicles as 'white goods' rather than aspirational purchases. He added that quality improvements would be part of the solution, but rather than build quality, most buyers should be able to feel the quality. Hyundai is improving the materials used for its vehicle interiors as a result.

Stepping up

The other significant theme for the conference was the need for component suppliers to step up their quality and use of technology, as well as their output. While component malfunction had fallen from being the source of 76% of faults reported by car buyers in 2007, to 52% in 2009, according to independent surveys, waste as a % of total cost for Indian OEMs ranged from the best at 4% to the worst at 18%, while world averages were in the range 1-4%.

“Can component suppliers keep up” with the growth in output, asked MM Singh, managing executive officer for production at Maruti Suzuki, which thanks to its 800cc small cars still retains a 50% market share by units in India. “Customers want product – not babies,” he added, in a cutting observation about the perils of long waiting times for delivery to customers.
 

Both Honda Siel and Renault Nissan said they were happy to outsource more components to achieve volume, especially where they get the common benefit of investment in technology advances made by the Tier 1s, according to VP of manufacturing for Honda Siel Rajeev Wasan, and Srivathsan Kaustubhan, assistant VP at the Renault Nissan technology centre in Chennai. Wasan said that localisation of engine components continued apace, with a new engine plant completed in March 2010 and due to start trial production in 10 months. 

'Happy to outsurce' – Honda Siel's Rajeev Wasan

Quality and cost

The overall theme set for the conference was ‘Quality up: Cost down’, and the manufacturing equipment suppliers who were out in force and on display in the networking area of the conference also had their challenge in striving to deliver against these twin goals.

Singh called for them to deepen their activities in India. “Share know-how, not just product,” he said. “I don’t want to have to develop specialisation in house,” and added that it was very difficult for him to use suppliers which did not have a local infrastructure. “A global reach isn’t enough,” he commented.

The opportunities for improvement are immense, however, and he characterised them by saying that “money is lying around on the shopfloor,” and simply needed to be picked up. The three P’s of people, process and part quality would deliver those savings for Maruti Suzuki.

The OEM senior executives present also described to the conference some of the practical improvements being made. Louis Pereira, CEO of Mahindra Vehicle Manufacturers, reviewed progress at the company’s new Chakan plant, where commercial vehicle production started in May 2010 after an under-deadline 22-month implementation period. The plant has four body-in-white shops, two paintshop lines and 12 assembly lines, and produces trucks ranging from one to 40 tons.

Louis Pereira, CEO of Mahindra Vehicle Manufacturers and Srivathsan Kaustubhan, Senior Vice President of Renault Nissan India

In the ramp-up to full capacity, scheduled for 2013, he said they had looked particularly at the paintshop, which was 58% of the total cost of operating the plant, and at power, which was 86% of the paintshop costs. Energy per vehicle had been reduced from 932 units to 246 since the plant came on stream, he reported, which was better than expected, and a new target of 150 units per vehicle had been set. As the paintshop uses the same amount of energy regardless of production level, Mahindra has worked with paintshop provider Durr to target energy-saving opportunities, including using heat from the ovens to heat the e-coat dip to its required 50degC.

In similar vein, Renault-Nissan's Kaustubhan spoke of how the company had developed a method of hanging carbodies on specially-designed racks in shipping containers, in order to fit three rather than two shells. While volumes in India for the model could not justify a full assembly line, this allows Renault to offer the car in-market at a competitive price, he said.

CKD manufacturer BMW had eliminated 25% of non value-add costs by taking advantage of a week’s shutdown in the (brief) pause in market growth at the height of the world recession, and its Chennai plant managing director Jurgen Eder returned to the role of employee involvement and motivation in delivering these improvements. He outlined planned employee progression through the company, which – in a new initiative – could see some of them travelling to Germany for further training.

Small remains big

There is no question that India will continue to be the land of the small, low-cost car, delegates were told by Honda’s Rajeev Wasan. In fact the current 80:20 split in favour of small cars across the whole market may even go to 90:10. Maruti Suzuki's Singh stated that buyers are looking for improved quality at the lowest possible cost, and that companies that failed to deliver this combination – particularly in the small car sector – would be destined to lose share.
 

On that point, Ford’s Boneham confessed that the carmaker had made a mistake in ignoring India's potential, and had been “a bit slower than Hyundai in learning”. But having been in-country for 15 years, “we're looking to make up for lost time,” he said. The Q1 2010 launch of the Figo was accompanied by the opening of no fewer than 28 new dealerships, and the company now had production capacity for 200,000 cars plus 250,000  engines per annum, and was looking to create big expansion. Some 70% of Ford’s growth in the next 10 years will come from Asia-Pacific (including China and India), said Boneham, and 70% of that will be in small cars.

This is not to say that opportunity for the luxury segment is not present in India. The countryreportedly has just seen its first purchase of a Bugatti Veyron (for $2 million apparently, because of steep import duties), and Mercedes-Benz general manager for assembly line production, Shekhar Bhide, said the luxury market is growing twice as quickly as the general market.

But small remains the new big, as indeed was reported from the previous AMS India conference, held last year in Pune. It’s apparent now, however, that rapid market growth, and the rewards from those ‘fabulous’ times, will come not just from capacity and technology. The ability of both OEMs and Tier suppliers to grow and retain skilled people may well be the critical competitive advantage in delivering volume and quality at a lower cost.   

Round Table

AMS organised a pre-conference round table on behalf of hosts Microsoft and Rockwell International, at which senior
OEM executives examined how internal collaboration could help to streamline production process.

The round-table took place in the afternoon before  delegates assembled in the main conference hall


Bob Honor, information solutions vice-president at Rockwell, talked through the issues of formalizing data and data usage within a company. The objective is to avoid employees developing their own 'shadow' network, where data is processed outside the company's enterprise-wide systems due to their inflexibility.
Rockwell and Microsoft working together offer the development of customizable and very flexible systems that allows users to select, view and compare the data they need in order to make their decisions.

Ford Plant Visit

Conference attendees had the benefit of a tour of Ford's Chennai plant as part of their delegate fee. It took place on the day after the conference.
Tom Chackalackal, vice president of manufacturing for Ford India, welcomed particpants and gave a presentation on the plant’s activities, with an in-depth look at its various operations. Following this, visitors were split into small groups, each accompanied by four Ford managers, for a tour of the blanking and stamping lines, body-in-white, and trim and final assembly areas.
Most notable about the plant was the future-proof flexibility of the new lines. Currently producing the Ikon, Fiesta and the new Figo models, the lines are set up to accommodate vehicles from several different segments as they come onstream.

Other areas of interest to delegates included the press lines, with their high-speed die change facilities, and body construction, with its mix of 30% automated and 70% manual operations over the weld shop. Highlights also included the painted body buffer store, powered handling systems for IP and seating assemblies, and the torque and turn monitoring fastener systems.

The visit was professionally and well-organised by the Ford team, and of great interest to the 100 participants.

 

Following AMS India, and in the same location, was India's premier conference covering automotive logistics. See details at www.automotivelogisticsindia.com