Auto Component Manufacturers-Flying into the aviation...

Every second day of my SIP goes into either making a new article or correcting the same. In this time of recession we see the automobile sector on a very low ebb.We are seeing low demand for the auto components from Europe and America. Therefore the auto components sector in india are spreading their wings into the defence and aviation sector. Some companies call it reducing risk by diversifying business and some others call it innovation. whatever it is it the component sector which is benefitted.

Introduction

A number of auto component manufacturers are foraying into the aviation sector. The main reason we see companies into the aviation sector is because of the uncertain nature of the automobile sector at present. They are diversifying their business to reduce the risk from being in just one sector. Why the uncertainty? We will see as we go further into sector. The shift to the other sectors according to ACMA (Automotive Component Manufacturers Association) is to utilize the idle facilities and increase its supply channels. Entry into the aviation sector seems to be a good idea because it a synergy exist between the aviation and the automobile sectors. There is a good mix of engineering and manufacturing expertise available with auto component makers and they have taken advantage of their existing capacity to cater to the needs of the aviation industry.


Factor for entry into Aviation

For Indian auto ancillary makers, getting into the aviation and defence space has many advantages as gross profit is much higher than the typical 10 to 12 per cent in the component business. ACMA also stated that manufacturers were facing the risk of rising input prices and idle facilities due to slowdown in the auto sector. Catering to aviation sector can double the profit margins on components that are supplied to the auto sector and there could be a jump of 5-7 per cent as the auto component manufacturers are catering to customized products with specialized usage. Component companies are trying to insulate themselves from the cyclical nature of the automobile industry and are tapping the high value aviation business.


Companies making entry into the Auto Sector

"We are looking at partnerships with various Indian companies for different aircraft components. So watch this space," --- Ian Thomas, president, Boeing India.

Companies that have made headway or are planning to enter the fray include JB Auto, Lumax Industries, Caparo Fasteners, Lakshmi Precision Tools, Bharat Forge, Lucas TVS, India Pistons, Helical Springs, Caparo Engineering and Shriram Pistons
Auto component manufacturers and tyre makers are making the first quiet moves into an uncharted area — components for aircraft manufacturers. Cashing in on the low cost of skilled labour, a clutch of companies like Maini Precision Products, MRF Tyres, Pune-based Minda NTS, and Sundram Fasteners are taking the first tentative steps to supply to the big world of aviation. Meanwhile, MRF, India's largest tyre manufacturer, has taken the first step by making tyres for helicopters used by the defence services. Pune-based auto component manufacturer Ashok Minda Group’s has tied up with Australia’s NTS Tooling to set up a venture. The company is unwilling to share details of the tie-up. But a spokesperson said, “The new facility, apart from providing services in design and manufacture of high-quality precision tooling for the automotive industry, will cater to the aerospace and defence sectors.” NTS has two decades of experience in these sectors.

JBM Group, one of the leading supplier to auto giants like Maruti Suzuki, Honda and Tata Motors, is gearing up to be a supplier for the aviation sector. It has been learnt that the company has already started building passenger trolleys for airports. Lumax Industries, an automotive lighting solutions company, is conducting a study on the high-precision aircraft lighting market. Tata Automobile Limited (TAL), a 100 per cent subsidiary of Tata Motors, has firmed up plans to build structural components for Boeing's 787 Dreamliner aircraft. One of the country's largest engine pistons manufacturers, Helical Springs, has received bagged orders to supply compression springs to the Indian defence forces.
Indian Machine Tools Manufacturers' Association has stated that it is developing and assembling machines for Hindustan Aeronautics and have huge orders from the aerospace industry to make customized machinery applications for making structural components
JBM Group, which is a major supplier to Maruti Suzuki, Honda and Tata Motors, is gradually moving to aviation and has also begun supplies to the white goods sector to keep its bottomline intact. This has been a depressing time in the automobile sector with some segments posting negative sales. Component makers are directly dependent on automobile companies as from its total Rs 65,000 crore market, around Rs 43,000 crore worth of procurement are directly done by OEMs (original equipment manufacturers). But the slowing economy has slammed the brakes on the industry’s growth, forcing component suppliers to rethink future plans.
This estimate excludes the nearly $2.4 billion in offsets that come to Indian firms from Boeing Co. and Airbus SAS for the passenger planes they sold to state-run National Aviation Co. of India Ltd, or NACIL, which runs Air India. Boeing has committed to sourcing $1 billion worth of goods in 10 years from HAL, besides planning a repair facility for Air India in Nagpur. Airbus has awarded HAL a Rs340 crore deal to buy around 1,000 doors for its A340 planes, besides committing to source more doors from the Indian plane manufacturer.


Reasons for global Slowdown

The big fall in sales of automobiles in the US and Europe has impacted Indian component suppliers. The economic slowdown there is compelling vehicle manufacturers to cut production and cut back on parts sourced from India. The Indian suppliers are experiencing a 20-30% drop in orders. The company has been experiencing the slowdown at its plants in Germany since August, says a top official from Sona Okegawa, part of the Sona Group. The company acquired German conglomerate Thyssenkrupp’s business unit in January this year to become the world’s largest precision forgings supplier. The Rs11 billion company Wheels India, which supplies to companies such as Volvo, Komatsu and Caterpillar, say that that decline in truck sales have lowered its overseas schedules by 20-30%. The decision of European and Asian carmakers such as General Motors, Ford, Daimler, Nissan, Toyota and others to cut down production in view of the global meltdown, is likely to affect the Indian auto component industry.

The auto component industry fears a winter of despair as ACMA, or Auto Component Manufacturers Association, has made recommendations to the government and wants a two-three year bridge policy to help them survive the global economic crisis. The body recommended that the customs duty on key raw materials should be reduced to zero. It also said there should be no disruption in ongoing and approved funding by banks for capex requirements. The government should take immediate steps to shore up liquidity and should evolve special loan schemes at concessional rates of interest.


Threat from China

Auto component manufacturers in India bet that they have an edge over others in manpower skill, but we see that passenger carmakers appear to be keen on investing in China. The US-based Delphi Corporation, for instance, has shifted more than half of its operations to China, despite sourcing some critical automotive components from India. Domestic auto component manufacturers contend that India would emerge a winner in the long run. But where exactly is the country lagging at this juncture? Is China a threat in this space? The strong rupee has made imports cheaper and a trend where imports are growing ten times faster”\ than exports is evident. But the industry is most fearful of China, from where most imports have been coming. The last two years have seen a growth of 87 per cent from China, which has crossed Rs 1,200 crore.
A cross-section of foundry industry sources concedes that China has an edge over India both infrastructure-wise and raw material-wise. "They can produce castings at 75 per cent of our cost. But, then, the industry enjoys Government subsidy. According to foundry industry sources, the Chinese bank on American and British technology, while the Indian advantage is skilled manpower, particularly on the castings side. Though they have no idea of the prevailing cost of power in China, they maintain that the electricity charges account for one-fifth of the production cost in the foundry segment.


A view from Bharat Forge-World largest forging company

With India buying large number of aircrafts, which includes wide-bodied aircrafts like the A380, Bharat Forge is very bullish on the new venture, which would include high-value, technology intensive products. This would be further boosted with many global manufacturers looking at off-site programmes from countries like India and China to source components. Though the off-site trend in the civil aviation industry has yet to catch up, they see it gain pace by the end of the current calendar year. While Boeing has already initiated it, others are likely to follow suit. The sector offers huge untapped potential, as there are very few players globally supplying forged and machined components.
Known as the auto-component hub of India, Pune has upped the ante and staked claim as the new backroom for aerospace engineering. The city-based Bharat Forge Ltd (BFL), already a global player in the auto-components sector, is setting up a Rs 350 crore Centre for Advanced Manufacturing at Baramati in Pune district. The plant will have forging capacity of 30,000 tonnes a year, manufactures 1 lakh machined crankshafts and engage 1,200 workers. With global aviation majors Boeing and Airbus looking to source components from India, Bharat Forge is all ready to board their vendor list. The plant, scheduled to start commercial production in April 2008, is targeting a turnover of Rs 350 crore in the first 18 months.
This is how China built its own civil aviation industry — BFL chairman Baba Kalyani. By using the offset programme and technology flows that come with it over 15 to 20 years. Bharat Forge will start with structured parts and landing gear while aerospace engine parts will come next.
The Baramati plant will have one of the world’s largest closed die manufacturing capacities with an 80-tonne hammer, which can produce pieces that weigh 2.5 tonnes each and are 4.5 meters long. “The best we make currently is 350 kg. So the new plant will make eight times bigger products.


Airbus on Growth prospects in India

Airbus also sees an opportunity to sell A380 and A350xwb aircraft in India. The feeling is that Indian carriers will also increase their share of international traffic to and from India from 35 per cent to at least 50 per cent. The fact is when you look at the global aviation market we see that India and China are going to play an increasingly important role. In fact, if Airbus is ramping up its production capacity, it's largely to meet anticipated demand from India and China. The A320 family, which is the aircraft of choice for many Indian carriers, has seen production boosted from 32 aircraft a month to 36 aircraft a month and Airbus are thinking of increasing capacity on the A330/340 line as well to meet demand. Aviation giants, especially Airbus from Europe and some big companies from the US are looking at sourcing components from India due to the low cost offered by component manufacturers in India.


EADS-in India

European aeronautics giant, EADS, had to obtain clearance from the Foreign Investment Promotion Board (FIPB) to source goods and components from India. The multinational has been allowed to source components for its subsidiaries as well as other companies across the world. EADS India required FIPB approval as it would source components from small scale sector. These components, including those sourced from small scale units, are intended to be supplied in the international market as well as India. However EADS required specific clearances for investment in subsidiaries. The FIPB has also stipulated that the company should not undertake the manufacturing of arms and ammunition or any other defence sector activity. For any activity related to defence, space or civil aviation, the company should obtain sectoral approval.
France-based EADS has a major presence in the Indian market through Airbus and Eurocopter. Its subsidiary, EADS India, will be providing after-sales, maintenance and Upgradation services to Indian customers. In India companies like ISRO, Hindustan Aeronautics Ltd (HAL), Air-India, Indian and private airlines like Kingfisher and IndiGo, are its customers. The company's capabilities in India include Airbus; ATR, EADS EFW, EADS Socata; EADS Astrium; Eurocopter; Military Transport Aircraft; EADS Defence & Security Systems. EADS has offices in New Delhi and Bangalore.


Conclusion

The growth of automobile component sector manufacturing automobile components is in its nascent stage, there is a lot of scope for improvement. The automotive component manufacturing companies have taken a few small steps in the right direction. This takes, for instance, between two and three years of investment and certification of equipment and personnel before orders trickle in. You need to invest long term. Though currently we see a slump in various economies the world over, this is just a passing phase with growing population the demand is set to increase. The aircraft manufacturers like Boeing, Airbus are set to increase their production and planning big time into sourcing components from India. With better quality of products than China, India only have a big advantage.


References

http://www.indiacar.net/news/n59129.htm
www.wheelsunplugged.com/ViewNews.aspx?newsid=2764
www.dnaindia.com/report.asp?newsid=1244889
http://avindia.blogspot.com/2009/04/auto-parts-firms-fly-into-aviation.html
http://economictimes.indiatimes.com/News/News_By_Industry/Auto/Auto_Components/Auto_spare_makers_eye_defence_aviation/articleshow/3382118.cms www.business-standard.com/india/storypage.php?autono=313972
http://www.india-today.com/btoday/20061231/current3.html
http://machinist.in/index.php?option=com_content&task=view&id=223&Itemid=2
http://www.screenindia.com/news/bharat-forge-to-set-up-aircraft-parts-plant/29803/
http://www.business-standard.com/india/storypage.php?autono=313972http://www.thehindubusinessline.com/2008/01/01/stories/2008010150990400.htm

Tax and legal structure-A stumbling block for logistics in India

this is an article on the logistics sector in india submitted by me for the first evaluation with a hope of getting it published which i think will happen but not in my name..............sorry for the bad editing here not much time to make it perfect
hope it is nt bad to read

Synopsis

This article mainly deals with the legal and tax structure which is big hindrance to the logistics sector in India. These hindrances and procedural delays lead to an inefficient and ineffective warehousing system. This article will gives us an overview of the tax structure, legal procedure, the cascading effect due to tax and regulations and most important of all corruption the biggest problem plaguing the logistics industry.

Introduction

38% in raw materials purchasing and packaging, 16% in manufacturing, 7% in distribution, 30% in sales and marketing and 5% in net profit, so what are these percentages we are talking about? These are the amount of money a business process pays as taxes at each and every step of operations. Here we would like to concentrate on the first three processes majorly as they deal with logistics part. Here we see the multitude of taxes that a company got to pay for the same product from procurement till the sale of the product.

Logistics is an extension of the transportation system with emphasis to achieve a effective and efficient distribution system. There are various decisions that need to be made in an efficient logistics management say: product design, location, warehousing etc, but there are certain rules and regulation that govern these logistic service players in India. The objective of the article is to explain the implications of legal and tax procedures on logistics in India with special emphasis on transportation. The face of logistics sector in India is set for a sea change, when it comes to services India is already a world leader. When it comes manufacturing India is lagging far behind China but the scope of growth is very high. The number of third party logistics payers willing to enter India is very high but somehow the complicated procedures make life difficult for them in conducting their business process. As we move ahead we would look at the tax and legal aspect that govern the logistics process, the problems of corruption which plague the transportation sector, some new thought process put into place by the government which might prove beneficial for the service providers in the long run.

Tax structure in India

All these years a differentiated tax regime had been the bane of any business process in India. To explain each state had its own tax structure which made the process of setting up a business in one state different from setting up a business in another state. Taxes in India are of various kinds and various rates. The effect of applying so many taxes and with bureaucracy in India there are so many procedural delays that affect the working of the logistics service providers in India. There had long been calls for a national tax regime, now with the application of Value Added Tax the design of services that logistics companies in India provide would see a sea change because all intra state taxes would be neutralized and we would have one single common tax. The states too competed with one another by offering tax concessions for location of manufacturing or warehousing facilities. Therefore we need both the central and the state governments to work together on finding a solution to the problems. Having a differential sales tax structure brought in diseconomies of scale, though VAT had been implemented from 1st April 2005 failure to implement it throughout the state bought has seen that the problems related to tax exist even today. Other than this the logistics players have to face numerous other taxes, octrois, check posts, harassment by officials and due to this we have delays and high costs of operation. Value Added tax was introduced in India in the 1980s where every stage from manufacturing to consumption is taxed to the extent of value added in the stage. Before VAT was implied the taxes was collected at one single point and it was possible to evade taxes at a few places. It has taken 25 years for VAT to be completely implemented, the disadvantages of slow implementation has been companies have had to set up a large number of warehouses throughout the countries in order to escape the intra state taxes or the central state taxes. This has lead to an inefficient distribution system and not warehouses at strategic locations which would cut down cost and increase efficiency in the system as a whole. Despite implementation of VAT states find new ways of earning revenue. New ways of collecting money in the form of levy, rates, and cess are taken by the state governments. State sales tax for e.g. are levied in a state in diverse forms. When we go into much detail the state sales taxes are much more complicated than the wretched excise duty on manufactured products. There are so many plethora of other state taxes like Octroi in Maharashtra “as the saying goes why cut the hen that lays the golden egg” the Maharashtra government tends to ignore the call for abolishing the Octroi because for the Mumbai city alone it earns a whopping 4500 crores for the Birhanmumbai municipal corporation. Maharashtra is probably the only state where Octroi is applied to the whole state but different places in Maharashtra have different rates so it makes it even complex for the logistic service providers. Place Tax rates + processing charges for Octroi of .25% Mumbai 4.75%

Thane 4.25%

Pune 7.25%

Chinchwad 2.75%

Nasik city 4.25%

Adapted from http://www.frizair.com/

Then there are various taxes on the vehicles like tax on use of roads, ownership of vehicles, purchase of vehicles, usage of vehicles, entry tax into states and different motor vehicle tax structures in different states. This makes it even more complicated for operations in the country.

Cascading effect

Cascading effect is the main reason why the companies these many days asked for uniform tax structure. Let us take an example we have a finished products the company has to play the sales tax on sale of the finished goods, sales tax paid on raw materials, service tax paid on transportation and sales tax is levied on all taxes paid in the previous steps. The same thing happens with the logistics industry so they end up having about 20-50 distribution centers all over the country so as to avoid the cascading effect. This is actually a very high number when we compare it with the developed countries and China. This make up for an inefficient and ineffective system.

The Legal Regime

The legal regime is as complicated as the tax regime if not more. The plethora of laws that govern the system make it as much confusing. In India each state considers goods from other states as imports thus you have state government laws along with the laws enacted by the central government. The major sufferers in the logistics side are the truck operators as most of the laws are there to control them. The major areas where the truck operation are regulated are the quantity, quality, safety, price, labor, environment, regulation of brokers(they mainly arise due to corruption), regulation of axle load. This majorly related to the truck carriers and their operations. There are so many checkpoints and long queues at these checkpoints that make it tedious for the truck drivers, then there is the problem of corruption which I would touch upon in the next segment. The other regulation is the regulation of goods i.e. what kind of commodities is carried from one state to another. A commodity transferred may be a single commodity or a multiple commodity from a single from a single supplier to single receiver or multiple suppliers to multiple receivers. The problem here is a truck may contain a commodity which might be banned in one state but not in another thus the supply of other good is delayed. Most of the provisions in the regulatory regime for the consumer is unrealistic and difficult to follow. The trucking industry in India is also highly fragmented as they are completely unorganized the prices for the trucks are decided by a few players who form an unorganized cartel and the prices are decided. Logistics to third parties are soon becoming a solution with a large number of foreign players entering India but the legal structure for their entry is not really conducive. Types of permit for incoming and outgoing of goods in some states
states goods coming in Goods moving out Uttar Pradesh Form 31 Form 49 West Bengal Form 42 Form 48 Punjab Form 24A Orissa Form 32 Rajasthan Form 18A Form 18B (Data adaptedfromhttp://ashish.scm.googlepages.com/MicrosoftWordConceptPaperonGSTImple.pdf) Apart from these there are rules for good passing through the state like Form 51 in Rajasthan

Corruption in the trucking sector

According to a report by Transparency International India ranks 72nd in the list but with the trucking industry alone making upto 80,000crore it makes the index feel superficial. How many of us with motor vehicles or passenger vehicles have been caught by the cops and taken to the side and had some money frisked from us. It is no different to the truckers either for every kilometer they travel on a average they have to shell out 70 paise per kilometer. A rough estimate would to bring it to about an annual estimate of 80,000 crores. This is the extent of corruption in our country in the trucking services alone so when we get deeper we see corruption is one deep quagmire of problems for the logistics industry. The RTO and police authorites are the biggest sources of goodnesd trouble as they are the main enforcement agencies. The amount of forced stoppages that the truck drivers make takes upto 11 hrs of their time and this leads to delay in arrival of shipments. The amounts of harassments that the drivers have to face from the officials are one of the major irritants. Such attitude shown on the part of has seen the truckers engage the brokers for getting their work done from renewal, issuance of permits, truck permits, fitness certificates etc.

Conclusion

According to a world bank report released in 2007 India ranks 39th in global trade logistics, but for a major developing country don’t u all think it is pretty low. For a major so called developing nation 39th position is not a proper reflection that is to be given to the outside world. In India the average hours travelled in a month is around 250 hours whereas in Europe and America the average is around 800 hours, this leads to proper inventory management maintenance. The article was to bring forward the facts regarding legal and tax procedures in India which haunt the logistics players in India. The amount of procedures they have to go through to set up business and then follow the rules so tedious so as to dissuade any of the honest enforcers.. How application of VAT will help is an interesting point to see, hopefully the logistics players are definitely seeing light at the end of the tunnel. The confusing tax procedures atleast seem to end the legal procedure too should follow suit soon so as to make comfortable for a lot of players to enter the market and make it a more organized market.

References

Adaptations from www.frizair.com

A text book on logistics and supply chain management by G.Raghuram and N. Rangaraj

Private equity in shipping transportation & logistics in India, Vishal Sharma, Tuscan Ventures

Outbound logistics and local taxes, Janat shah & Balram Avittathur

http://ashish.scm.googlepages.com/MicrosoftWord-ConceptPaperonGSTImple.pdf

The Role of Transportation and Logistics in India: Emerging Issues and Prospects-Dr.S.Sriraman

JUST FIVE

i just thought about typing down few and very few memorable events of my life till now.....surprisingly i had a few despite the sick luck i take with me....here are just 5 memorable moments of ma lyf which i think i njoyed

1) the first one has to be my winning the quiz with Anand......walking down the aisle with with around 5K ppl watching you in one the biggest school fests in that i have witnessed in Chennai was a surreal feeling. just a lil disappointed that i cudnt team up with him for much longer


2)this is defintely my favorite moment ever .......i got to see someone i simply didnt think i would see in flesh and blood. one single man who answered to the name of Boris Becker had come to play in the Chennai open and the mad hysteria surrounding him was simply magnificent. the mad sporting buff that i am made me book a ticket for his match but unfortunately it happened to be the quarterfinal where he lost and i was simply awestruck just watching him live and i can assure you when he lost there wasnt a man in the stadium who wasnt disappointed and many even left the stadium with moist eyes including yours truly...............FOR ONE FULL WEEK "KING BORIS RULED CHENNAI" it was boom time.

3) Another favorite was during the engineering dayz when we organized a musical fest for charity in our college called "PRERANA" ....sole objective was to raise money for an old age home to put up a solar water heating unit at the home......we felt this is wat we could do to support them.......the amount of joy that one cud see on their faces wen we set it up was overwhelming........a beautiful moment.....hope the main protagonists JOB, CHARAN and SUMIT are doing pretty well....
4) again engineering and it happens to be my third and fourth year and with plenty of memorable and funny moments ....will neva 4get the shimoga trek (thanks for carrying me nachu) nor the prabha bashing thanx to hari ..........i just wish we could have been closer all the four years.........i miss u a lot guyzzz....hope we all get together one daythot will take all ya names.........yashu, chethan, reddy,swamy, dongre,shamanth, giri, vivek, hari, charan, nachu,sunil, nitesh and sorry if i have missed any i am growing old u see bad memory


5) this sounds vague but it is moment which i had, have and will be having in the future.......a visit to the sea...........the marina in chennai has alwayz been a spot which has been close to me either with friends or alone ..............sometimes when i stand in front of it i wonder how miniscule we are....... we ppl are nuthin compared to the sea but still we try to control it...the vastness simply overwhelms me everytime i visit the sea....dont wanna sound too philosophical

these are the few memorable moments of ma lyf......had some more and might have in the future also but these will forever be in my memory

LANCE IS BACK..........................

 for me the name lance armstrong alwayz gives me goosebumps.........not that he won the TOUR DE FRANCE seven times ...ya he did win the toughest race in the world a record seven times but for sheer determination in coming back from dead and sitting on the bicycle again is why he is a champion.

        

                A man who was destined to be a world champion was diagnosed with cancer in 1996 (testicular cancer.to be precise)    The survival chance being as low as 5% the disease by the time detected had spread to his brain abdomen and lungs but through sheer determination and will power he made it through. when doctors said he was dead he rose like a phoenix from the ashes.

 

               taking treatment for cancer is not easy, the treatment itself is very painful, but it showed the mans will power to go through pain. These features of the man would always showcase during the races when he would leave opponents for dead in the critical moments and that is where the man stood apart. The part of the race which would be tough for opponents would be a piece of cake for him.

 

  Some say he was superhuman, some say he did it on drugs which i am sorry to say was never proved and can never will be hopefully..but who cares just that he came back from dead and rode again probably is an inspiration for so many cancer people around the world. Not only for cancer people also for all of us because he showed what will power and determination can do.

 

                why did i think about writing about him............when everybody thought he had retired in 2005 for a peaceful life and taking forward his lance armstrong foundation which probably is doing one hell of a job, what do we hear............the MAN is back on the cycle again .............cant keep him off the seat i suppose .......he is back for the tour de france 2009..... will the worlds toughest and the most dangerous race take a toll on his body or he is still the same super human only time will tell.

   

                 Come july  whatever happens at the champs elysee, Paris ...whatever the final result is...... LANCE ARMSTRONG would go into the history books as one of the greatest ever which is for sure not just for cycling skills but also for something he gave to millions of people ...............      a magic 4 lettered word called ..................................................................................................................

 

HOPE

 

to visit the foundation

 http://www.livestrong.org/site/c.khLXK1PxHmF/b.2660611/k.BCED/Home.htm