Ruia Global Fastener: Breaking the cost and cultural barriers

For Mr Jorg Bosch and his colleagues, the Beckingen plant of Ruia Global Fastener AG (RGF) is a part of their family legend, as most are employed here for generations.

In 1869 – just before internal combustion engines were introduced – the Hetzeler and Kolb families had set up the facility in this picture-postcard town on the river Saar, in the South-West Germany bordering France, to cater to the evolving automotive sector.

Nearly 140 years later, the plant – now a part of the Kolkata-based Ruia Group controlled, RGF – is not merely an ancillary to the top notch German auto makers such as Porsche or MAN but a part and parcel of life in Beckingen.

The story is similar to the three other plants of RGF in Germany at Nuess, Neuwied and Schrozberg together having a century long history of catering to the whos who of the German auto industry.

All of them were separate family owned businesses intertwined with their distinct local cultures and are literally paranoid to not let the “know-how” go beyond the boundaries of their respective facilities.

However, all these proved inadequate to survive the fast changing economic order of the day. And, all these family businesses were acquired by the US-based manufacturer Textron Inc sometime in the 1990s to create Textron Fastening Systems (TFS).

In a decade or so, in 2006 the portfolio was sold to Platinum Equity – a Los Angeles-based private equity – which built an even larger inter-continental portfolio of auto ancillaries, Acument Global Technologies, with a hope of making money on resale of equity.

In the end, Acument (Germany) was declared insolvent and went into receivership in 2009 before being acquired by the Ruias in February.

The problem had its roots in the cost structure and the uneven management practices inherited by these units. Leave aside the high labour cost (€30 or Rs 1,900 an hour); even the techno-economics of the plants were not similar.

For example, the Neuwied plant, which claims to be oldest and the most innovative of the RGF plants, has a higher rate of rejects in the production process than a younger Schrozberg facility. Needless to say that rejects add up to the cost of production.

“Fastener is not a critical auto component and is manufactured at a cheaper cost, if not more efficiently, in India, China and Taiwan,” says Mr Abhishek Parekh of Auto Monitor.

While German automakers are keen to place orders with their home-grown suppliers, there is pressure on prices of such supplies.

Mr Ruia agrees that there is sufficient scope of improving the cost efficiency of RGF.

“The insolvency administrator took steps towards streamlining the product portfolio of the plants; integrating the purchase and delivery mechanisms and; bringing in a cultural and technological homogeneity within the company through sharing of technologies between plants. We are taking these initiatives forward,” he said adding that the company is expected to close 2011 with an EBITA of €10 million.

This reporter's visit to Germany was sponsored by the Ruia Group.

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