New Delhi-based ANAND Automotive is a group of 19 companies set up over the past 50 years. Every company in the group is either a market leader or ranks among the top three in its field of operation in India. Integration of these multifarious units, including Gabriel, MAHLE, Federal-Mogul, Valeo, Faurecia, Spicer India, Mando and others, and operations with a diverse workforce spread over 60 locations in India into a powerful unified entity, has made the group an auto parts conglomerate.
ANAND provides the widest range of automotive products and solutions to every major vehicle and engine manufacturer in India. Through its 24 global partnerships with technology leaders, the group offers the Indian automotive industry an impressive array of customised solutions to suit the local needs and ecosystem, Deepak Chopra, Group CEO, ANAND Automotive, told T Murrali of AutoParts Asia in an exclusive and extensive interview. The excerpts:
Q: You may take us through the group; how did you fare last year and how is the current going?
A: We are a Rs 9,400-crore group. Last year was a very successful year and we grew around 12 percent over 2017. For the past five years we have exceeded our top line targets except once. But in all these years we have done much better on our margins and bottom line targets. Before that we had a few difficult years after the recession in 2008-09 when the industry itself was down.
We have 19 companies of which 16 are joint ventures. Balance three are either wholly-owned ANAND entities or in case of its flagship public listed entity Gabriel India, the group holds majority stake and the balance is with public and Indian and foreign Institutional investors. Of the 16 JVs, in two the group holds majority stake and in the rest, it holds a minority stake but is a very active partner contributing proactively along with the foreign majority partner to the success and growth of the JVs. While no new company was added in the past five years, the group entered several new businesses. We employ around 17,000 people, including around 3,000 contractual and service staff.
We are in 60 locations in India. Four of them belong to SUJÁN, our hospitality arm. While our hospitality business is less than one percent of the total group sales, during the last six to seven years it has gained an immense reputation globally as a luxury hospitality chain in India and is profitable. Most of our top line (99 percent) comes from the automotive business. We have no operations abroad nor have we made any acquisitions overseas, but we do have operations of our JV and technology partners abroad and to many of them we export products from India.
Q: Which of the 19 companies had consistent growth and why? Are there pain points, and where do you think more can be done?
A: All the companies are profitable and recorded excellent growth and profitability during last year. These include ANAND’s largest company by size; Mando Automotive India; its flagship and listed company Gabriel India, Spicer India, MAHLE Behr India and others. Till three years ago we had our safety product business; our Takata JV still in gestation phase, due to its global recall issues. Even this company is now profitable for the last three years. Takata has completed its restructuring process and is now part of Joyson Safety Systems group of China which is our new JV partner. With this restructuring, we have now started booking new business from OEMs and with the impending legislation on compulsory usage of driver and front passenger airbags, this JV also has a good future.
A few of our companies which have not been performing to their potential in the past are also now poised for significant top line growth and better profitability. ANAND i-Power with capacity expansion for machined clutch plates, Federal Mogul ANAND Sealings with multi-layered steel gasket line and MAHLE Filter Systems with strong pipeline of OE business especially in systems are well placed now for take-off.
Q: Will Tenneco buying of Federal-Mogul have any impact? Will that lead the group to unexplored areas?
A: Once the announced deal closes and Tenneco becomes the global owner of Federal-Mogul, we will have to sit down with them and talk. Tenneco does not have the engine parts business in India so there is no conflict there. Tenneco and ANAND compete in India in two products – shock absorbers by Gabriel India and exhaust systems (Emission control business) where our group has a JV with Faurecia which is the global leader in this business.
We are quite used to working with several multinational JV partners which have multiple products and compete with each other in many of them. So we will have to build on our new relationship with Tenneco and explore opportunities on other product lines that can come with them.
Q: How is the ‘content per vehicle’ growing for your group companies?
A: That is a barometer we are in the process of adopting to map our growth. We have continued to add new range of products with advanced technologies and new customers to continuously grow the content per vehicle. We also track on an overall basis the group’s share of the total auto component industry in India which has moved up from 2.5 percent to 3.1 percent last year and is projected to improve to 3.5 percent by 2022. We have more than 35 products in our portfolio and presence in all vehicle segments. So we are looking at the present content per vehicle segment wise and making efforts to grow it. The emerging trends in auto industry like those on the EV/ Hybrid, autonomous, connected vehicles or on tighter emissions and safety regulations will also provide opportunity for better content per vehicle.
Q: Does the ‘new mobility’ give opportunities for the group? How are you preparing it to manage the disruptions in the industry?
A: Most of our partners have or are developing these new products and technologies and we are working with them to bring them to India in line with the emergence of their need. EVs or hybrids have been becoming strong in many markets globally for which our JV partners are suppliers. In India also there is a significant push by the Government for EVs. There is doubt about the adoption rate of EVs by 2030 but all agree that it is a reality and all of us have to start working on it in India.
We are getting EV-ready. Six months ago, our group companies had a Technology Day with Mahindra Electric to showcase the current available products and technologies for EVs. We have set up an Automotive Growth Council headed by ANAND Executive Committee member Sunil Kaul. He and his team look at all emerging trends. We are in touch with our JV partners to understand their plans, and how they are introducing it elsewhere.
We are engaged with our customers like Tata, Mahindra, Suzuki and others to know their need for these technologies so that we can bring relevant technologies through our JV partners in India for them.
Amongst these emerging technologies, the group is already implementing electronic brake systems (ABS/ ESC) in Mando India which already is a leading producer of EPS (Electronic Power Steering). Faurecia India is a leader in emission control especially the hot-end side for complying with BS-VI norms. Takata (Joyson Safety) is a leader in both active and passive safety. MAHLE Behr India is already a supplier of battery cooling products to current Indian EV makers like Tata and Mahindra. We are working on lightweighting with a UK-based R&D company. We are establishing a proto-shop here to prove the concept to the OEMs and convert it later to mass production facility, based on demand.
Q: How do you see disruptions like additive manufacturing influence your plants?
A: There have been multiple initiatives from our group and from our partners to bring in manufacturing excellence. We adopted ANAND Production Systems on the lines of Toyota Production Systems which later on we changed to ANAND Heijunka Production systems (AHPC) to focus on levelled production.
ANAND House of Quality Culture (AHQC) encompasses many manufacturing and operations level initiatives to bring in a culture of quality and zero defect. AHQC, launched recently by our Chairperson Anjali Singh not only aims at process or product quality but on both our internal and external customers; how we deal with them, the response time and quality of experience and value we deliver to them. It focuses both on plant as well as office quality.
We also want to upgrade our supply chain and vendors and focus on sustainable manufacturing. Some of our larger companies like Spicer India, and Gabriel are bringing out sustainability reports. We are working on adopting a sustainability policy at the group level.
On Industry 4.0 we are learning and trying to take on pilot projects in some of the companies to see how it can benefit us on our shop floor to make things more efficient. We are not talking about total automation but semi-automation. We have experimented with some robotics, for instance Gabriel has some robotic assembly lines.
Q: How do you propose to ensure success of your growth plans?
A: As part of our medium range plans, we want to grow to a size of Rs 20,000 crore ($ 3billion) by 2022 both organically and inorganically, from our current size of Rs. 9,400 crore ($1.4 billion). We will then be 3.5 percent of the overall size of the auto component industry in India against the 3.1 percent now.
When we mapped our plans, we knew things would happen on the aftermarket and export fronts, new technologies would enrich our products in the pipeline and the content per vehicle will grow. ANAND is well poised to capitalize on these opportunities and grow.
Q: What is the update on the group’s initiative – Cost of Poor Quality (COPQ)?
A: COPQ has been running in our group for around 12 years. Over this period, cost of poor quality has come down from 3.5 percent to less than one percent at the group level. Earlier what we captured was all the failure costs of COPQ which included internal failure costs such as rejections and rework, external failure costs such as rejections at customers’ end or warranties which came back from the field, premium freight for expedited shipping etc. We had to first target and control that.
We are now graduating to COPQ 2.0. It means now that we have made good progress on controlling failure costs, we have to focus on the prevention and appraisal cost. Earlier in our COPQ system the prevention and appraisal costs were not being tracked, for example cost of installing firewalls on production lines to prevent defective products going to customers. Instead the focus should be on producing defect free products. This may mean more cost relating to prevention initially but eventually the total cost of poor quality would come down.
Q: Would that also involve proactive maintenance?
A: Absolutely; preventive and predictive maintenance as well. Those are things we are also using in Industry 4.0 concepts where you can track many parameters of performance of equipment and you can predict what will happen. We are doing a lot of pilots of these. We are also at a learning stage for Industry 4.0 including from our partners.
Q: What about your model of having diploma engineers on the shop floor?
A: The diploma engineer or operating engineer (OE) model has itself served us very well and has been running successfully for over 25 years. Barring some of our older plants, all our new plants since last 25 years are based on this model where we have no unionised workmen on the shop floors. Our model is that we want people to come and work both with their hands and mind and gain experience at the shopfloor and graduate to become supervisors, managers, plant heads and heads of companies.
Q: Is this HR-related initiative attracting your partners?
A: Our partners are very interested. They feel that with this knowledge workforce on the ground, no one needs to deal with unions. At the same time, we have to make sure that we continue to look at the welfare and growth opportunities for our people.
Sometimes there are grievances but if the organisation believes in this work culture and redresses those grievances quickly, people appreciate that we genuinely believe in their progress. Our OE model has proved itself to be sustainable on long term basis, including recently in Pune where we had some challenge to the success of this model for a short period.
Q: What about your Performance Management System?
A: We have automated the entire performance management system through HRMS- Human Resource Management Systems. Assessment happens twice a year. Since the last five years, in our top 10 companies we are following a large-scale interactive process of setting goals, including for our support functions. Our variable incentive programme has weightage for both financial and operational parameters including to internal audit score for the company/ plant.
We also have a robust Profit Assurance Plan (PAP) system, to track and fill in the gaps whenever any company or plant is lagging behind the budget targets during the year. The purpose is to try to meet the bottom line even if the top line cannot be met due to market conditions. That is why in the last several years, we could meet our profit targets even though we fell short of our sales targets due to a weak demand.
Q: As a CEO, how do you keep the channels open with customers, vendors and employees?
A: We have customer meets on a regular basis from companies and our corporate business development team. At the group level we have quality cost delivery reviews with many important customers on half-yearly or yearly basis. We also have Technology Days once in a couple of years with all major customers besides being present in the Auto Expo and regional auto shows. Our Chairperson and I are part of the vendor council of many OEMs. We have an active business development department which acts as the eyes and ears of our customers. The five-member ANAND Executive Committee (AEC), which I chair, has divided the businesses amongst themselves and we try to keep in touch with customers. Our Chairperson Anjali Singh, I and my AEC colleagues also regularly attend vendor meets of customers including some global OEMs.
Our companies regularly conduct vendor and dealer meets to keep in touch with our suppliers and aftermarket dealers. We have Visionary Small and Medium Enterprises (VSME) programme under which we train and upgrade our supplier partners.
As regards our people, we have many forums and avenues to communicate with them, to train and upgrade their skills. We have a robust ANAND Leadership Development Programme (ALDP). We hold quarterly reviews and communication meets for our group which rotates in each hub; Pune, Gurgaon/ Parwanoo, Chennai and Nasik, with the ANAND management committee visiting plants in each hub and keeping in touch with our people.
Q: Tell us about sourcing components for overseas joint ventures, aftermarket and exports?
A: This is another way in which we leverage India for our overseas partners. This is an area which has developed well for some companies but not for others. For instance, for Haldex, we source raw products and machine them in India within the JV and then supply them for global requirements. For some companies like Dana it is partly routed through the JV and partly supplied directly.
On the exports front, earlier only 10 of our companies did exports. Today almost all the 19 do. Because we have joint ventures, sometimes we do not export independently but only through our partners. In exports we have been growing at a rate, well ahead of our overall growth in India for OE and aftermarket.
As regards aftermarket, we are working on many new opportunities. OEMs are much more aggressive now in the spares market and therefore, we track not only aftermarket but OES also. Put together our own aftermarket and OES should be substantial and should continue to grow. About 11 percent of the group’s overall revenue comes from exports, eight percent from domestic aftermarket and the balance 81 percent from domestic OE and OES supplies.
Q: What is the direction of the group’s R & D?
A: Efforts have been made since last eight years to bring in a culture of innovation. We have the unique JV model, where in most cases our partners have majority stake. We have free access to the technology of the partners since their IP is getting protected. Some companies like Gabriel are independent. Here we have our own R&D investments. Investments in R&D could involve product, and process, both manufacturing and business processes. We talk about a culture of innovation in all processes. We think about new ways of doing things and improving, whether it is in accounting area, in human resource practices or in optimising plant layouts through the concept of v-maps. Anything having more than 30 percent improvement is treated as innovation. The rest is kaizen – continuous improvement.
Apart from that, each of the companies invest on innovation and R&D, to be self-sufficient on design skills, testing and validation. On an average in each of our companies, the investment on innovation or R&D is at least one to 1.5 percent besides the royalty payments to partners for access to technology. Gabriel is more than two percent and has a four-wheeler R&D centre in Pune and two-wheeler R&D centre in Hosur. Under AHQC, we have the Excellence in Manufacturing Group. If all these are added, the real cost of our innovation and R&D efforts would be four to five percent of sales, closer to international norms.
Q: What are your short-term and long-term plans – in terms of capex, new frontiers, new markets in exports?
A: We do not make very long-term plans. A few years back we kept an aspirational target to reach Rs 50,000 crore of top line by 2030. We already see that this is not an ambitious enough target and we can do better. As mentioned before, our medium-term target is Rs 20,000 crore for 2022 accounting for 3.5 percent of Indian auto component industry turnover. We would like to grow ahead of the automotive industry growth. With so many transformational changes happening the structure of automotive business may be very different in 2030. Based on all the partnerships, we feel we should be in a stronger position than other groups.