The Hindu Business Line : Recession helps cleanse the system, say some auto component cos

Chennai, Nov. 15 The slowdown in automobiles sales may be having its inevitable deleterious effect on the auto components industry, but instead of the wail of the stricken, what is heard are words of equanimity.

Now is the time, they say, to set right various things on the shop floor, for which one would not have found time during the boom.

Cost cutting opportunity

Besides, a recession also brings back discipline into the system, causing, for example, a fresh look at opportunities to cut costs. This attitude is seen more in medium-sized companies than the large ones — companies that had not undertaken large capacity additions.

Take the case of the Chennai-based M M Forgings Ltd.

“Now that there is no pressure of delivery for existing products, we are able to give more attention to developing new products, new customers,” says Mr K. Vidyashankar, Managing Director. M M Forgings, he says, will “at worst” grow by 10 per cent this year.

Mr C. Jayaraman, Managing Director of the Bangalore-based Aditya Auto Products Ltd, feels the slowdown gives the management the time to spend on the shop floor.

“In happy times, companies focus on only meeting increasing production schedules,” notes Mr Jayaraman.

Similarly, Mr V. Mahadevan, Managing Director, Hinduja Foundries Ltd, a veteran with over four decades of experience, says that it is necessary to have recession in cycles to “cleanse the system”.

Companies that had managed the boom well are able to cope with the slide, some even welcome it. M M Forgings revamped its tool room, added products and customers. Suprijit Engineering’s Managing Director, Mr K. Ajith Kumar Rai, says that the company had ensured that it was not dependent upon a single customer for more than 15 per cent of its sales. Today, the company is able to brave the recession by cutting inventory, using alternative materials and value engineering.

Yet, notwithstanding the sangfroid, the auto components industry looks set to pass through some testing times. With outsourcing taking a beating, the industry’s exports grew by just 6 per cent in April-September. In the last five years, it had been growing at a compounded rate of 25 per cent.

On the other hand, imports continue unabated. In 2007-08, imports grew 50 per cent, to $5.3 billion.

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