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`India cannot survive only as low-cost producer'

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MICO chief commissions parts manufacturing plant of LGB

DR ALBERT HIERONIMUS, Managing Director, MICO, at the Kovilpalayam plant of LGB that manufactures components for the Bosch Group. - S. Siva Saravanan
DR ALBERT HIERONIMUS, Managing Director, MICO, at the Kovilpalayam plant of LGB that manufactures components for the Bosch Group. - S. Siva Saravanan

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Coimbatore, June 7

To characterise India merely as a low-cost producer is too simplistic a description of the potential of the country and India could not survive as a low-cost country alone, according to Dr Albert Hieronimus, Managing Director, Motor Industries Co Ltd (MICO).

He said the Indian companies of the Bosch group, of which MICO is a part, contribute nearly two per cent to the annual global turnover of Bosch group and this was likely to grow further, though he would not like to specifically mention as to how much the growth would be in the future.

Commissioning plant

Speaking to newspersons here after commissioning a parts manufacturing plant of L.G. Balakrishnan & Bros (LGB) Ltd, at Kovilpalayam near here that was dedicated to meet the needs of Bosch, he said a country should be more than low cost and should have engineers, should administer quality, have quality suppliers to survive. India met all these parameters. Even if one of the parameters was missing, one could not be successful.

He said MICO's presence as a manufacturing company in India was more than 50 years old and it was exporting about 20 per cent of its turnover to the Bosch group companies, mostly in Europe and the US. The biggest exporter to Bosch today was Robert Bosch India, the software arm, which has 3,100 engineers doing the software work for Bosch and the company was in the process of establishing an IT facility in Coimbatore. This only meant the `huge pool of talent available in India' he said. He replied in the negative when asked whether the company would list the Robert Bosch India since it was in captive business catering only to the needs of the Bosch group. Dr Hieronimus said 20 years ago, the `diesel cars were perceived to be smelly, noisy and non sporty' but this was no more the case. The new generation Common Rail Direct Injection (CRDi) diesel vehicles had engines that were more powerful and were fun to drive than petrol engines. The diesel engines consumed about 30 per cent less fuel than a comparable petrol engine and cost of diesel itself was about 30 per cheaper than petrol in India. Though diesel cars commanded a slightly higher price than petrol cars, they were cost effective if one logged 10,000-15,000 km a year. It was no longer true that the running cost of diesel cars was higher than petrol vehicles. The diesel market in India was growing and by 2010, Bosch would sell 6 lakh CRDi systems.

He said the Bosch group has planned an investment of about Rs 1,800 crore in 2005-08, including the Rs 550 crore for the CRDi fuel injection system manufacture. This would be adequate for the initial stage. But when the Euro 4 norms come into effect in 2010 in the country, the number would increase. The current capacity was 300,000 pumps a year and the capacity of injectors was higher because of exports also.

Flanges production

Mr P. Prabakaran, Chief Operating Officer (Transmission Division), LGB & Bros, said the unit would manufacture flanges using precision machines to meet the requirements of Bosch. The company has invested about Rs 10 crore in the project and by 2010, the unit would achieve a turnover of around 6-8 million. The capacity of the plant was 60,000 flanges a month initially that would go up to 1.10 lakh a month from January 2007. Commercial production at the plant would commence from September this year. LGB has entered into a 10-year agreement with Bosch for supply of parts from this plant.

Future plans

The MICO MD said the total turnover of Indian operations of the group last year was about 750 million and the total turnover of the Bosch group was 41 billion. The share of Indian operations to the total group turnover was a little less than two per cent. Asked about the anticipated growth in Indian operations in the near future, he declined to give any guidance but said Bosch has `strong plans to grow' especially in Asia Pacific since it was a growing market and Bosch was focussed on this market. This share would grow in the coming years. The presence of so many German carmakers in India like Mercedes, BMW, Skoda and the likely entry of VW were good news for Bosch's Indian operations since they were customers of Bosch.

(This article was published in the Business Line print edition dated June 8, 2006)
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