Interview with Niraj Hans, Managing Director, Fiat Partecipazioni India Pvt. Ltd.

Company Description: Fiat Partecipazioni India Pvt Ltd was set up in August 2009. Almost all the sourcing activities Fiat was doing till then under Iveco was transferred to this company. Earlier the Fiat sourcing company was only dealing in parts for Iveco and Fiat Power Train. After this new company was formed it started doing sourcing business for Fiat cars also. Fiat Partecipazioni is a full-fledged sourcing company for Fiat cars, trucks and engines. Niraj Hans is  Managing Director at Fiat Partecipazioni India Pvt Ltd. A mechanical engineer and MBA by qualification, Hans started his career in automobile sector with sourcing of automotive components and handled the assignment at various capacities for various Indian & MNC automotive players in purchasing and global sourcing function.

How was sourcing done before Fiat Partecipazioni was formed?

Under Iveco we used to source components for Iveco as well as Fiat Powertrain. In January 2008 the Fiat group decided to integrate all purchasing activities in Italy. As a result we too were asked to combine all our purchasing activities. Because it was an Iveco branch office we did not want to be seen  as an Iveco entity working for the whole group. So we decided to float a new company so that we could demonstrate it from the group perspective. The entire Fiat group purchasing also comes under the holding company. You call it a legal umbrella. So in India we are doing purchasing as well as business development as far as engineering outsourcing activities are concerned.

When was Fiat Partecipazioni India set up?

The company was set up in August 2009. Almost all the sourcing activities we were doing under Iveco we have transferred it to this company. Earlier it was only Iveco and Fiat Power Train. After this company was formed we started doing sourcing business for our cars also. So now we are full fledged in cars, trucks and engines. As for tractors, the strategic part is done from here while and execution part is done by Case New Holland.

So what does sourcing entail for your company?

This office deals with exports of components from India. We have local colleagues managing the local sourcing from vendors. Our team comprises those from purchasing, supplier quality, supply chain, engineering support etc. The support also comes from expats from Italy based here. We have separate teams for global spare parts sourcing for cars, engines and tractors. We are a small team but we support the Indian suppliers in supplying components to Fiat worldwide. That includes Europe, Latin America, and North America etc. We also do sourcing for non-production vehicles. Internationally there are a lot of vehicles that are no more in production but they are still being used by customers. We call them non-production vehicles. That business alone is worth 5 million Euros (Rs 29 crore approx.) per annum.

What is the total value of components that are being sourced out of India?

This year we shall touch around 110 million Euros (Rs 649 crore approx.) We have around 80 suppliers in India supporting this activity for us. Almost 750 part numbers or varieties of parts are going from India to various destinations. We are relying on our experience of the Indian market and we have a basic supplier selection process before we get into business with any company. They are not dedicated suppliers but suppliers selected by us.

Are there any common automotive parts that are sourced out of India?

India is very strong on mechanical parts. In mechanical too you have various categories like machining parts, forging and machining, casting and machining, sheet metal products, wheels, aluminium die casting components, engine components, pistons, crankshafts etc. These parts constitute the majority of the parts exported out of India. Since last year we have started with chemical parts like plastics, rubber parts, glasses, electrical products etc. We have started the process in these areas and we expect the results from next year onwards. A majority of our parts is going to Italy. We started with Italy, Spain and Germany and since last year we have been supplying to Latin American countries like Brazil and Argentina also.

When we take parts from India we see the business case. The business case is based on how much investment we need to put in and what is the return we are expected to get. Our first focus is on the mass produced parts.

Is Fiat Partecipazioni India working as in independent company or does it have to take into consideration Fiat’s existing businesses in India?

On the operations front we are an independent company. Having said that, our synergies exist with other Fiat companies. We keep on discussing our strategies with regards to a particular supplier. So there can be a common strategy wherein the parts supplied to our plants in Ranjangaon in Pune for cars and engines are also exported. The team here is only responsible for exports.

What makes India a good sourcing base for Fiat?

We started this activity in 2003-04 but today the market is developed and is strong. The Indian supplier base is now an international supplier base. In short they are Indian multinationals. We are trying to tap them as far as their technology is concerned and their capacities are concerned. India has a definite advantage but I must say that cost advantage is going down slowly. But we need to see beyond that. There are so many technologies that would be transferred to India and China in the coming years. On the quality front there were a few teething problems but once we got into it these problems were settled to a great extent. We started this business as part of re-sourcing. There was already a plant in Europe but we wanted an alternate supplier in India. But since 2010 we have been giving Indian suppliers business awards for advance purchasing projects involving them with Fiat projects that would be started beginning 2012. Hence Indian suppliers are part of this co-engineering and co-development. That is the kind of confidence Fiat has on its vendor base in India.

From the purchasing perspective how exciting is the Chrysler business since it is now Fiat owned?

We have colleagues sitting in Chennai doing the purchasing for Chrysler and we have full synergies with them as far as supplier data base is concerned. We have so much of experience dealing with suppliers for Fiat. Chrysler too is getting into that. So we definitely share as soft synergy. The Chrysler business to is picking up and is doing well. With Fiat platforms being launched in the US in the coming years, Chrysler will be also tapping the supplier base which we have been dealing with.

How has growth in sourcing business been the last few years?

We started with around 50 million Euros worth of sourcing in 2007-07 and then we touched 70 million Euros and are now poised for 150 million Euros 110 million for this year. Cumulatively we have done business worth Euros 370 million or so and in the years to come it will definitely be increasing.

Did you have to cross several hurdles to reach this stage?

Traditionally the Indian supplier base was developed to supply the Indian OEMs only. That was the way the technology and the facility were put in place by the vendors. But the same suppliers have over the years invested in their plants and raised the bar in the production both in terms of quality and capacities.

Would you like to throw some light on the supply chain aspect of this business?

When we merged our offices in India we were getting a lot of support from the different supply chain providers. So when we merged we had around 13 to 14 supply chain providers. Keeping our overall business in mind we short listed five supply chain providers and finally chose one from this who is now supplying all the suppliers from India. They have different warehouses all over the country where all the parts go. My supply chain team is able to track the product. It is a huge logistic exercise to ensure that the parts produced in different plants across are finally supplied to OEM plants located in the different parts of the world.

What is the road ahead for your company?

We have very clear cut business plans. We are going to source many products from India. Advance purchasing is precisely in that direction. The suppliers will be catering to not only the vehicles that are being made today, but those that would be made in the future. Many commodity senior officials from Fiat would be visiting India in the coming time and we are going to increase the business here. Our 2011 target is to include more suppliers for chassis, interiors and plastic components in a big way. We are also exploring sourcing of tools and dies and thereby get into engineering capabilities.