'Selling in China will take time'

Q&A: Suresh Krishna

Suresh Krishna

Sundram Fasteners (SF) was the first Indian engineering company to start a manufacturing project in China. A year after the high-tensile fasteners factory was commissioned. SF's chairman and managing director Suresh Krishna spoke to Business Standard about the experience in China and other issues. Excerpts:

A year after your factory was set up in China, you're still not selling in the local market. Is there a problem?

We always planned that the first phase, which could be up to 18 months, would be used to get the entire workforce trained the way we wanted. Now that we're up and running, we have to get ground level accreditation in place. A lot of customers in China want to see a factory which is running so they can come, see and audit "" so we export to customers who already know us.

The second phase of the evolution is that there are a lot of multinationals who buy from us. They also have manufacturing facilities in China; it's easier to capture them. That's already starting. After the third year, we will look at the local market.

There will also be more pressure on Chinese automotive manufacturers to upgrade quality levels. The other thing is that we are not looking at China for two years. We are looking at China for twenty-five years.

What's the difference between your hiring in China and in India?

Chinese labour is very productive but it's also not less expensive than India. I find is that there is more attrition in China. It's because there is tremendous opportunity and people switch jobs even for small incremental wage structure. That is the price you pay for an economic boom.

What about the work ethic?

It's too early to say. The one difference is that Chinese labour does what it is told. They make excellent assembly workers. The problem with Indian labour is that they ask why should I do this? We have a lot of intellectual questioning. It's okay, it's good, but at some point of time you have to say I have been told and I should do this.

I must say to the credit of my boys "" we have got 10 of them "" they have picked up enough Mandarin now. So they are able to converse. They've taught the boys there a little bit of Tamil. It works quite well. Why not, it's only communication.

You are to increase your investment in China in phases (SF has $6 million invested there). When is the next phase coming?

We will do it as and when the situation demands. We are investing a million-and-a-half this year.

In India, almost everybody has indicated there is a slowdown underway in terms of automotive sales.

You cannot be growing at 30-40 per cent every year, it's not possible. My personal feeling is that it will take a pause for a year, and start growing again.

There is a direct correlation between domestic size and exports. At a critical juncture there is a slowdown.

The entire western world is very keen on outsourcing auto components. The only problem I see in India is that as this wave grows, Indian companies must learn to ramp up. Suddenly, you may be asked to make an investment of 30, 40 or 50 million dollars.

You must be capable of taking this risk. It is a risk. For instance, one recall from a customer can wipe you out. But the amount of reward is equal to the amount of risk you take. It's up to us to rise to the challenge and start delivering.

The other thing that is happening is that automotive companies in India are acquiring companies in the US and Europe with the idea of back-ending to India. It will help your export. Instead of exporting directly to your customer, you are buying your customer through an intermediary manufacturer.

You talked of being among the top three fasteners manufacturers in the world (SF is among the top 10 now). Something like that may require more investment than your cumulative investment so far.

It's going to be done over a period of time. If I have to wait for 10 years, I will wait. I also have to be very clear in my mind what segment of fasteners I will be in. There are so many crossroads.

Was the Dana Spicer acquisition (in December 2003, the UK-based precision forgings business was acquired) about getting more customers?

Both the things. They wanted to exit England. We got it at a reasonable price. It's been very good. The Malaysian operation, we got it along with Autolec. When we wanted to join with Bleistahl (a joint venture in India with Germany's Bleistahl) it was a variation of the same theme. We got access to all the customers. They have got the technology. They found that they cannot be competitive by producing in Germany.

You don't have a footprint in the world's biggest market.

Seventy per cent of our export goes to the US. The footprint will come; it will evolve over a period of time.