The Hindu Business Line : Hero Honda mulls going global to source parts

TWO-WHEELER major Hero Honda Motors Ltd is exploring the possibility of procuring raw materials from the global market to cut costs, the company said in its annual report.

The Indian automobile industry has come under severe cost pressures over the past year due to rising costs of key raw materials such as steel and plastic.

Hero Honda will increasingly need to focus on the supply of parts and its vendors if it is to achieve cost and quality competitiveness in the Indian market, it said in its 2003-04 report. The company is able to access 70 per cent of the materials by value at zero-inventory. For the balance material, the average inventory is about 3-4 days, Hero Honda said.

Meanwhile, "as a measure of rationalisation of vendors, the company is resorting to system purchases and is also looking at the possibilities of going global to procure materials,'' the company said in its report.

Hero Honda had a total of 256 vendors (including 36 ancillaries) in the past year from which it bought parts. The company imported raw material, components, capital goods and spares worth Rs 381.50 crore in the last fiscal, an increase of 16 per cent over the previous fiscal.

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