Efforts on to revive Gumasol

The best part of Mr Hans-Jochim Schnur, Marketing Manager of Gumasol is: He is two-weeks-old to this company.

Naturally, he is open to bold measures to revive the fortune of this small yet innovative company, fighting for market space in competition with international majors such as Continental or Michelin - without much reference to the past.

Acquired by the Ruia Group from the ‘insolvency administrator' in August 2010, the Germersheim-based company has four major products: premium quality solid resilient (or super-elastic) tyres (Softy); rubber compounds (Gummix); rubber moulded parts and rubber-metal bonded parts (Formtech) and rubber coated wheel bodies (Rolltech).

Softy is used mainly in different sizes of forklifts for indoor or outdoor applications and has traditionally contributed nearly half of the revenue stream. Other products are used in various industrial and military applications ranging from conveyor belts, road paving machines, military tanks and others.

Outsourcing holds key

What essentially sent Gumasol to sick bed was the cost of production of tyres vis-à-vis the competitors who were outsourcing such products from the low cost Asian economies where a couple of people can be employed for a month, at the weekly salary (over €1,000 at €30 a hour for 35 hours a week) of one skilled employee in Germany.

The status of ‘insolvency' beginning November 2009 had further impacted the company's OE (original equipment) sales.

In a late attempt, Gumasol tried to outsource part of its tyre production from the Sri Lankan facility of its competitor, Continental. However, the strategy was clearly not enough to get back the lost turf. And, the company ended 2010 with a sales turnover of €28 million down from €34 million in 2008. Jobs were cut by nearly one-third to a little over 100.

“Having taken over, we advised the management to step up outsourcing but from a non-competing source,” said the Ruia Group Chairman, Mr P.K. Ruia.

Accordingly, Gumasol-appointed Global Rubber Industries Pvt Ltd of Sri Lanka as the new outsourcing agency. Plans are also afoot to outsource the entire range of Softy products beginning 2011. The sales strategy has also been shifted from OE to the aftermarket segment through Euromaster (a Michelin group company and is one of the largest supplier of tyre in Europe).

Further restructuring ahead

While the new strategies are expected to leave a positive impact on the Gumasol bottomline beginning 2011, Mr Schnur is not content with it.

“We are looking forward to Ruia group to guide us towards a robust topline growth,” he said.

Back in India at the group head quarters in Kolkata, Mr P.K. Ruia is also toying with several strategies in this direction.

On the cards are strategies like outsourcing tyres from even “cheaper” Indian producers, leveraging the patents of Gumasol to manufacture rubber compounds, rubber-metal moulded parts in India for the domestic consumers.

“This company is perfectly poised to grow. The growth should come from catering the rapidly growing sub-continent market,” Mr Ruia said.

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