Mumbai:

Automotive component manufacturers are to the automotive industry what spices and seasonings are to a dish: mostly invisible but crucial to the character of the finished article. Typically, about 60 to 70 per cent of the many parts in a vehicle are procured from an outside supplier. It''s a business that generates revenues of hundreds of billions of dollars worldwide, and, increasingly, it''s moving out of traditional production centres in America and Europe to low-cost, high-quality manufacturing hubs in Asia.

China and India have for some time been prime destinations for global auto makers seeking components for their vehicles at prices that are 20 to 30 per cent lower than anywhere else. But while China''s auto-parts industry has cashed in on this demand, its counterpart in India has lagged behind. The situation may be about to change, though.

There are about 500 companies in India that make components for cars, two-wheelers and commercial vehicles. It''s a mix of geriatric niche operators, established but conservative players, and ambitious colts determined to make the most of a market that promises exceptional growth. In the last category is Tata Autocomp Systems, or Taco (www.tacogroup.com), the Pune-based enterprise that started as a logical extension of the Tata Group''s ambitions in the automotive space.

Starting small
Taco''s beginning, back in 1995, was modest (it was established in what amounted to a shed in Pune), but its goals were always big. Today the company has a turnover of Rs 806 crore and it exports products and services worth Rs 67 crore. It has 3,000 employees, a clutch of joint ventures with industry-leading companies from the US, Japan, Germany, France and South Korea (see ''Joint effort''), and clients of the calibre of, among others, General Motors, Ford, Toyota, Honda and DiamlerChrysler.

Taco sprang from Tata Group chairman Ratan Tata''s vision of an integrated Indian automobile industry where technology would be on par with world standards. Tata''s dream of making an indigenous car is well documented, as is his success with the Indica venture. Not so his parallel objective of a component industry that would complement India''s car-making abilities. Tata believed that the group had to be a catalyst — and Taco a vital cog — in this process.

The roadmap was laid out: establish associations that would bring global auto-parts leaders to India, not through limited relationships as in the past, but through comprehensive technology partnerships that would help the country advance its technical capabilities quickly. It made good sense. Since Tata Engineering, maker of the Indica, was aiming for the highest standards, it had to have the best of components. The only way that could happen in a hurry was through technology from outside.

A second, just as important, strategy direction was to look beyond local shores. Taco''s brief from the very start was to become truly global, to seek out world markets. Its joint-venture partnerships were specifically geared towards making exports a key element of the overall business blueprint.

Building confidence
Chalking out the plans for the joint ventures was the easy part; getting them off the ground was a different matter. "We went to the US, to Europe and to Japan and made presentations to global suppliers," recollects D. S. Gupta, Taco''s managing director. "It took me a year and a half of going around. Today this process is very short, because we can show them what we have done, but back then people had to come and see for themselves, they had to talk to our potential customers. Frankly, they were not very confident about the growth of the auto industry [in India]."

The first of the joint ventures was sealed in late 1995. This was mainly for seating systems and the partner was Johnson Controls, an American company with a turnover of about $20 billion (that''s bigger than some major automobile companies). The agreement was indicative of the qualities Taco was looking for in its partners: leadership in size and technology, and to be a provider of expansion opportunities. "We wanted something like a pathway to business through global suppliers, so it was very important for us to tie up with global leaders."

The challenge for Taco at this point was to break out of the Tata Engineering cocoon. Taco''s biggest customer remains Tata Engineering, accounting for 46 per cent of its revenues, but it also has many other big-ticket names on its client roster. Says Gupta: "Initially, everybody said that Taco was being set up as a subsidiary of Tata Engineering. We are not saying that we don''t support Tata Engineering, but our mandate was a much larger one: to be a forerunner in creating a technology base in India, and to help globalise the industry."

There was a lull of two years before Taco went into overdrive on the joint-ventures front. This was the period during which it developed its plans in different areas: engineering services, tooling, testing and system engineering. Then, between 1997 and 1999, it added nine partnerships to its portfolio, for everything from plastic components and wiring harnesses to mirrors and sheet metal, and began cementing its engineering capabilities.

Taco currently has joint ventures with 12 global automobile component manufacturers, each a leader in its business domain. Managing so many partnerships is tricky at the best of times, so how did Taco make a success of every one of them? By building relationships based on trust, by creating value on the parameters of quality, cost and delivery, and by blending its culture with those of its partners. Additionally, there was more than a bit of good fortune.

"We have been very lucky in this matter of building very positive, very strong relationships," says Gupta, a man whose emphasis on principles shines bright and clear. "We made sure our partners never had cause to feel short-changed, or think we were going to take advantage of them. We made sure there was total transparency in all our dealings. These people will not look at you as a partner for a global business unless they really trust you, unless they feel you are an extension of their own operation."

A question of trust
The question of trust comes into sharper focus when the topic is technology. Tata Engineering is more than Taco''s biggest customer — it is a sister company. Many of Taco customers operate in direct competition with Tata Engineering. They have to be sure Taco won''t misuse confidential data on their business to secure its fellow-Tata company a strategic advantage in the marketplace.

"It took us time to convince Tata Engineering''s competitors that they could trust us," says Gupta. The task was made easier by a personal guarantee from Tata himself that the group would never do something unethical, that Tata Engineering would never gain a commercial advantage through information given to Taco. "Of course, they have never had reason to use the guarantee, but they feel comfortable."

Today Ashok Leyland, Tata Engineering''s biggest rival in the commercial vehicles segment in India, sources various components from Taco, and it is planning to procure electronic components too. Another Tata Engineering rival, Toyota India, has assigned tooling design and production work to Taco.

As on the issue of trust, so with quality, cost and delivery. Taco has scored on these counts, but it is on cost that the men are separated from the boys. "The competition is always looking at giving the same product at a lower cost, year after year. The only way you can prosper is by pushing your own costs down, while at the same time improving your quality." Taco is doing this through quality-improvement programmes such as Six Sigma, and by concentrating on enhancing the benefits that Indian auto-component companies bring to the table: engineering skills, software strengths and an English-speaking talent pool.

Currying culture
Bridging the cultural divide with its varied partners is another success story for Taco. Given his experience, Gupta qualifies as an authority on this subject. "The Japanese are extremely difficult in the initial phase. It''s much easier to get an association going with Americans; they are more likely to take you on face value, but then it''s, like, easy come, easy go. The Japanese, on the other hand, will always stand by you once a relationship has been established. But I cannot say one is better than the other."

Gupta reckons the alliance with Johnson Controls has prospered the most. "Whenever we have asked for something, they have been most helpful; none of our other partners has really done that. It''s because we showcased our partnership with Johnson Controls that many of our later associates tied up with us. Having said that, I should add that all our partners are equal. I can''t complain about any of them."

Gupta''s grouse is with the Indian mentality towards business. "Basically, we don''t think big. We seem to be satisfied with small projects, small successes. So the Chinese will aim for a $1-billion contract from a single manufacturer, while we crow about crumbs. What Taco is trying to do is get our people to understand that we are part of a global team. We have to forget we are from India and we have to forget where we are working; it could be India, or Japan or Germany. Our concern should be about delivering."

Taco is now looking beyond its joint ventures to deliver products and services to its customers, especially in the area of supply chain management, where it expects to make huge gains in the near future, and electronics, including embedded software, digital signal processing and systems design. Supply chain management is a potential cash cow. It entails securing components for far-flung customers, ensuring QCD (quality, cost, delivery) for production, and the management of inventory and logistics.

"As of now our priority, in terms of customers, is Tata Engineering, then comes the domestic industry, followed by our global operations. But, three years into the future, we are looking at 50 per cent of our business coming from global opportunities. That means moving into services, it means selling our management capabilities. Taco is still young. We have to grow, and we are willing to try out new things while we are growing."

The grand plan is to touch the $1-billion mark by 2007 (India''s total auto parts turnover for fiscal 2001-02 was $4.47 billion). To get there Taco will have to grow even faster than the 40 per cent-a-year rate it has notched up since 1998-99. It won''t help to think small, as Gupta would undoubtedly say.

Courtesy: www.tata.com