Interview with Abhijit Mukherjee, Managing Director, Tenneco Automotive India Pvt Ltd.

Company Description: Since becoming a standalone company in 1999, Tenneco of US has grown to become one of the world’s leading designers, manufacturers and distributors of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco first established manufacturing in India in 1995 and has grown its operations to now include 1,500 employees at five production plants and two Just-in-Time (JIT) facilities. In addition to Chennai, the company produces emission control components in Halol and Pune. Tenneco’s ride control production is in Bawal, Pune, Hosur, and Puducherry.

How big and diversified is Tenneco’s business in India?

We set up a new greenfield site at Bawal in Haryana in 2008, which was specially built to cater to Maruti Suzuki. We started servicing them on the Ritz platform. We are 100 pc exclusive suppliers to them. Prior to that, we did business for Maruti’s old models like Gypsy and Omni. Currently we are busy in Bawal, expanding our equipment and capacity of next new launch, which is coming this year, for the all-new Swift. That will be again a 100 pc supply to Maruti Suzuki. We have also some production for after market that we do in Bawal.

In the west, we have a plant in Pune in Saraswati, which is mainly for exhaust systems. There our main customers are Mahindra, VW, and Tata Motors. We are also serving GM out of there. But what happens is with GM we make the components in Saraswati and we ship them over to our JIT plant in Halol, where we do final assembly and then ship them to our customer’s site. In Bawal we manufacture ride control products like shock absorbers and struts. It is suspension related. In Pune, we also have a ride control JIT facility, which is mainly serving Tata and there the main platform we are servicing is especially the Vista and the Manza.

We are also going to serve Mahindra out of there for their light transport vehicles, which will be rolled out of Chakan

In Pune we will be essentially shifting out of this old Saraswati plant into a brand-new greenfield site in Chakan. We have started building it from December last year and we hope to have it finished completely by the end of this year so that we can begin operations by the first quarter of next year. It will be a kind of a phased building. So we will probably have some operation starting this year.

We are going to integrate in that the existing plant at Saraswati. We will also have to shift the ride control JIT facility into the same location. We will most probably be dispensing with Halol final assembly. We may just use Halol as a sequenced warehouse for GM. We are mostly depending on the emissions side of our main engineering centre in Germany for Tenneco. But we will be developing our application engineering very actively over the next 3 years. We have a plan for that. And definitely, the move to Chakan will also help us in getting some sufficient space to put some testing equipment and other pieces into play for being able to do this. This is important for us because the emission regulations, as you know, are going to go tighter. And certainly one of the strengths for Tenneco globally is our technology and expertise in being able to bring solutions to the customers to meet these emission standards. And as you know emission standards are really a lot about trade-offs in terms of meeting emissions requirements versus engine sizes versus engine power. How do you kind of deal with all these three things together in the most efficient and cost-efficient manner? That is what the car OEMs or vehicle OEMs are looking for.  Because these emissions are applicable for both passenger vehicles and commercial vehicles and in fact in EU and North America, it will be applicable for off-road vehicles like excavators, tractors and so on. So this really is a key part of Tenneco’s strategy globally. And obviously for India, we would like to have that capability.

So you are basically into ride control and emission systems. Are you planning to go beyond that?

Right now, we feel that we are here in two areas where there is plenty of opportunity for growth for us, not only in India, but globally.  And therefore we intend to concentrate on these two product lines rather than get into something different. Having said that, I am not saying that we will not get into it.

What about Tenneco, the parent company? Do they offer other products?

To us, Tenneco is also looking at big growth in the next 5 years. And that growth is essentially coming a lot from our emissions business which because of the fact that emission standards are being tightened and broadened across different areas. I mean, for example, we have an agreement with GE to develop a complete emission after-treatment system for diesel locomotives. This is again completely a new area. We have an agreement with Caterpillar Inc to develop emission systems to meet the regulations for their products like excavators, backhoes and all those kind of things. Similarly, we are doing business with John Deere. Getting into these areas will require a lot of resources and will give us profitable growth, going forward, atleast for the next 5 years without fail.

More OEMs are likely to come into India, both into the commercial vehicle space as well as the passenger vehicle space. So, are you expecting enhanced business for your company?

We will be definitely looking for enhanced business on the passenger car side and CVs. I have to say that currently in India; our strength is mostly on the passenger car side. We have very less exposure, as of running models on the CV side. But we are hoping to expand as we go forward, one of them being Daimler (Bharat Benz), and other being the light commercial vehicles JV between Ashok Leyland and Nissan, where we also have won a platform.

How big is Tenneco’s business in India in terms of turnover, etc.

I’m afraid I will not be able to give you numbers. But I would have to say that, in terms of global business, it is not a very large part of it. But, we do expect that compared to 2010 numbers, which were already about almost double 2009 numbers, we would expect our 2015 numbers three times higher than 2010 numbers. So it’s growing very fast. I would say, next to China, India would be the fastest growing market. But we must not forget that the world vehicle production is around 64 million, out of which India’s share in it is still somewhere south of 3 million. There is a lot of expectation of significant growth taking place in the next 5 to 10 years. That is the reason why most OEMs are here. And that is the reason why we are there.

How critical is the Indian operations for Tenneco as a whole? What about other segments like R&D, etc where there is some kind of synergy with the global operations?

I have to be saying that currently it is the other way around. We are taking it from them. That is because, comparatively speaking, the maturity level of the Indian automotive industry is just now kind of, reaching standards. But what I do expect is that we would be taking advantage of some of the lessons that we are learning here in how to be cost-competitive in the design of our products.

But you have an R&D centre in Shanghai?

Yes, in fact we are using this for helping us with engineering, design and support for the platform that we have won from the GM-Shanghai automotive JV (for the LCVs)

So, no plans for an R&D centre in India?

As I said, we are going to enhance our application engineering.  And there will be an application engineering design and development centre.

When you talk about ride control, what exactly goes into it?

The two main things everybody is aware of are the shocks and struts. Normally, that is it. But we also have what we call, kinetic product line where we can control vehicle roll through hydraulic system. It is a completely different product line which is not brought to India yet, which we are using in some hi-end vehicles for e.g. the McLaren.  Along with the kinetic one, we make electronically controlled shock absorbers, the combination of which McLaren has selected for its sports cars and which we are making at our Belgium facility.

Will there be takers for such products?

I think there will be, as we go forward. And let me tell you that even shocks and struts are not that easy. Otherwise, there won’t be only the few players that you see now. Because, technologically, it’s not an easy product to make in terms of having the right ride handling and being able to satisfy demanding customers and repeating that in millions of products. So, you need to have the right design and development capability as well as the right manufacturing capability.

You just mentioned that a major chunk of your business comes from the passenger vehicle segment. You are getting into CV in a bigger way. How much does the passenger vehicle segment constitute today? And what about two-wheelers, how much do they contribute?

Around 85 pc is derived from the passenger vehicle segment. Rest is mostly commercial vehicles. We have a very small share in the two-wheeler segment. Again, both in the CV and two-wheeler segments we are very underrepresented. These are the two areas that we are looking to see how best we can expand into.

Tenneco is also supplying these parts to Toyota’s new vehicle Etios? Is this the only product?

That’s right, these are shocks and struts, So what happens is, currently among the new vehicles launched, Suzuki I’d mentioned, Ford we are there on their Figo for shocks and struts. And there are a few successive models that are coming also in the next 2-3 years. We are on the Nissan Micra as well on their successor coming in this year.

Tenneco markets its products under different brand names Walker, Gillette etc? Do we see these other brands coming into India?

In the aftermarket, we sell under the ‘Monroe’ brand. For us on the ride control side, Monroe is a very strong brand. We would like to keep on using that. Currently, we don’t have any immediate plans for bringing in an aftermarket brand on the exhaust side. But we are open to that situation.

What about plant capacities? Are you going full throttle?

What we do is we build capacity as we win business. Because, remember, in the OEM, you win business for a car this year. For example, I may not win a business in February 2010 for a car that is going to be launched in May 2011. Doesn’t work like that. Normally, you have at least a year and a half gap between winning a business, and actually launching a platform. There are, of course, variations to these things. In instances where, it is not a completely new platform launch but perhaps more like a facelift then, of course, it’s a different matter. You can have a shorter development time. So, from that perspective, what we try and do is add capacity as we win business. And in some cases, for basic things, we might add capacity in anticipation too.

So, there is no way you can say that you are going to build 50,000 of a generic system. On ride control, it’s slightly different, as you do have capacity which you can use for a number of new products.  That means in some case, anticipate. So you can strike a balance. But for us in Tenneco, as I told you already, we are anticipating in the next 5 years, a growth which would take us to triple our current 2010 revenues. And we would expect that the Indian growth story will continue beyond 2015-2020.  And that is where it is maybe get even more exciting. And India will become a major player in the car market after 2015.

But when India becomes 8-9 million, then it will probably be number 4 or number 5, that’s a significant player in the market.  And the thing is, you don’t know, if the growth story continues, it will continue to be more and more important in the next few years. So for us in Tenneco, it is going to be a very exciting growth story.

What is the road ahead for the Tenneco? What’s your vision?

We want to be definitely number one in the light vehicles like passenger vehicles, SUVs, MUVs and we want to be a significant player in the commercial vehicle segment.