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.