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business leaders > profiles > Baba Kalyani
Kishore Biyani
Baba Kalyani: Steering Indian auto components in world markets
Baba Kalyani, the indomitable executive chairman and managing director of Bharat Forge Ltd (BFL), has a firm grip on his company's role in the global auto industry. That's because he was the first to realise the opportunities from global outsourcing and start preparing his production processes to meet the exacting standards that foreign manufacturers would demand.

Today virtually every global automotive OEM and Tier I supplier, as well as automakers sources complex forgings like machined crankshafts, front axle beams and steering knuckles from Bharat Forge.

Bharat Forge's client list is straight out of the top echelons of the fiercely competitive global automotive sector and includes Ford, General Motors, Volvo, Daimler Chrysler, Toyota, BMW, General Motors, Volkswagen, Audi, Renault, Ford, Volvo, Caterpillar-Perkins, Iveco, Arvin Meritor, Detroit Diesel, Cummins, Dana Corporation, Honda, Scania among others.

Within a decade Kalyani has turned BFL into the largest exporter of auto components from India and a leading chassis component manufacturer in the world. BFL's Pune plant is the world's largest capacity single-location plant. In 2004-05 Forbes ranked BFL among Asia's 200 'best under a billion' (dollar revenues) companies.

With $1.8 billion in market capitalisation, it is now the second-largest forgings combine in the world and aspiring to climb to No.1 by 2008.

Liberalisation of the Indian economy during the early '90s triggered Kalyani's imagination that eventually propelled BFL straight into the global league. Kalyani devised a holistic three-pronged strategy to take on global opportunities:
With meticulous planning incorporating upgradation and modernisation he hiked production capacity at his Pune plant
He wooed automakers spanning half the globe from North America to Europe into buying his engine and chassis components and
He went on a takeover spree to acquire small forging companies abroad to enlarge his customer base. BFL today has manufacturing facilities spread over nine locations and six countries - two in India, three in Germany, one in Sweden, one in Scotland, one in North America and one in China

Born in an agricultural family in Maharashtra, Baba inherited from his father, Neelkanth Kalyani, about 60 acres of sugarcane plantations. In the 1960s the elder Kalyani decided to venture into manufacturing and set up a unit to forge parts for diesel engine makers, mostly for tractors and agricultural pump sets. Baba Kalyani, who was away at a boarding school, spent summer vacations watching the family business grow. "This experience taught me to look at the broader picture," said Kalyani in a press interview." .

After his engineering studies from the premier Birla Institute of Technology & Science, Pilani, and Boston's MIT for his master's in mechanical engineering, Kalyani joined his father's business.

During his first year of running the business he helped upgrade the manufacturing process and make the unit profitable. But he soon grew impatient with the sloth and morbidity of the low-technology cheap-labour combination. Instead, he wanted to shake-off the sloth to make the company globally competitive with a focus on innovation and technology.

In the late 1980s and early 1990s, amid bitter opposition Kalyani pushed Bharat Forge into investing around $55 million to consolidate and modernise the Pune plant when the company's annual sales were $120 million, and interest rates were above 20 per cent.

His focus remained equally on enhancing quality as well as quantity, and set up a new, largely automated plant alongside the old one, with in-house R&D, design and engineering, a full-fledged product testing and validation facility. This fetched BFL its first big US order - for $5 million worth front axle beamsfrom ArvinMeritor of Troy, Michigan in 1993. The client signed on after visiting BFL's high-tech factory.

As orders began to flow from elsewhere in the US, Bharat Forge became a major supplier to the heavy truck industry. Passenger cars were added to the commercial vehicle trade, with Pune still the factory base. BFL's customer segments now include even the non-automotive oil and gas sectors.

With the global expansion of BFL's customer base came the need to customise as well as to diversify risk geographically. Kalyani realised that BFL would operate a forge business more profitably in Europe or the US by using back-end manufacturing from its Indian operation to bring down costs.

For instance, it could churn out forgings at its Pune factory while staff in Germany worked with clients in designing and engineering products. Having a front end "gives you the ability to get involved in the design and development of new products for your customers, which is not possible from a long distance," says Kalyani.

Kalyani entered into global acquisitions, with the prize catch being the Dusseldorf-headquartered Carl Dan Peddinghaus, Germany's second-largest forging company, situated near the industry's world leader, ThyssenKrupp, in 2004, for €29 million. BFL has systematically made inroads into auto manufacturing hubs like Detroit and industrial Germany.

BFL has since made highly strategic acquisitions like CDP Aluminiumtechnik now known as Bharat Forge Aluminiumtechnik, Federal Forge now known as Bharat Forge America Inc Imatra Kilsta, AB, Sweden along with its wholly owned subsidiary Scottish Stampings, Scotland (together called as Imatra Forging Group) and has signed a JV with FAW Corporation, - the largest automotive group in China, now named FAW Bharat Forge.

"These acquisitions have given the company an edge of dual shore model and tremendous opportunity to leverage existing customer relations of the two companies, especially the European passenger car manufacturers," says Kalyani.

BFL also holds the distinction of being the first Indian automotive component manufacturer to have made a breakthrough into China in 2003 by securing large business from the two leading automotive manufacturers). Making further inroads, BFL is now even supplying machined crankshafts for diesel trucks, which it sells to two big Chinese engine makers, Wuxi First Auto Works and Yuchai.

Currently, BFL is implementing a major expansion programme at a cost of $110 million. When completed in 2005-06, the expanded capacities will enable BFL to address global market opportunities even more aggressively and capture a larger market share.

Like his machines, Kalyani is equally scrupulous about hiring the best engineers to run his plant- 1,500 of his 3,500 employees have engineering degrees. In a tribute to his Alma Mater, he sponsors a special programme for his employees to get an engineering

Baba Kalyani has elevated BFL to a role model for the Indian auto ancillary industry with a comprehensively designed business model, incorporating well-diversified product range, strategic partnerships for capturing global markets, and sustained cost reduction. Augmenting the effort is greater reliance on IT, R&D in design and technology to considerably compress development time and create the best 'speed to market' standard in the industry.

Compiled by Shubha Khandekar.

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