SKF has fully reversed production cuts

Rakesh Makhija, managing director of SKF India, is in the process of passing the baton to his successor Shishir Joshipura before moving to Shanghai. The IIT-Delhi alumnus is set to take over as the president of the Swedish bearing-major’s Asia operations on January 1. In an interview to DNA Money, he discusses, among other things, his seven-year tenure with SKF India, the revival in the automotive segment and the emergence of India as a R&D hub.
 
How do you look back on your tenure here?
Well, some positives, some negatives. I am happy where we are. But I think we should be much bigger than we are. In the last two years, we have not grown very much. In 2008, we were on the right track, then the slowdown happened. India is the right market for the kind of business we are in.

What is your outlook on the automotive sector, one of the most important for SKF, in India?
It’s quite good, both in terms of current volumes and ramp-ups. We see the commercial vehicle segment improving, especially heavy commercial vehicles. It’s been slow for the last two years but in the last 2-3 months we have seen actual growth taking place. CV production is dependent on industrial production, which has gone up in the last few months. Public confidence is higher than 6 months back. The government is also doing a good job keeping the non-food prices and interest rates under control.

How is it in the rest of Asia?
In China too, the ramp-up has been very strong in the last couple of months. They also went down significantly like us in the last quarter of 2008. The industrial economy has picked up over there. Indonesia is looking good. As far Taiwan & Korea are concerned it’s still not clear what direction they will take as they are heavily export-oriented. But our business in Asia is on a higher trajectory.

How much does Asia contribute to your global business?
About 20% and more than two-thirds come from India and China.

Is the turnaround in India earlier than expected?
I wouldn’t say that. When the downturn happened in the last quarter of 2008, like in the rest of the world, the sentiment here was people did not know what was going to happen. But as it happened, it was a sharp recovery, which happened in two parts. The automotive went down in August-September 2008 and the industrial economy went down in January. Then, the automotive sector started recovering in April then the industrial segment recovered in August-September.

Which industrial sectors are you betting on?
Metals, mining, cement, pulp paper, wind energy. Wind energy was what was driven by 2-3 manufacturers. It was affected badly and has not fully recovered. But cement has been surprising. Even during the slowdown it was growing at 7-8%. Steel has firmed up. All the segments we are strong in are coming back in a strong way.

How about exports?
Exports form about 10% of our business. We export to Europe, China, Latin America. Europe had the maximum amount of exports at one point and they came down. But again in the last 3 months, the direction is good.

When we last met in April, you said you had to cut production by 30% in response to the slowdown in demand? Has that been reversed?
Yes, completely.

When will your two new plants, in Haridwar and Ahmedabad, be commissioned?
The Haridwar plant is almost complete. We will start some of the pre-commissioning activities later this month and commercial production will begin in February. Even the Ahmedabad plant will start production in the first quarter of 2010.

You’ve recently opened a testing centre in Bangalore. Could we see India emerging as a critical R&D location for SKF?
In the longer term it will become important for the SKF group. The testing centre is one part of what we call GTCI (global technical centre India), which will constitute the global testing centre, global laboratory and global engineering centre. We have a similar thing in China, too. Here the intent is to have local engineering and product development. The idea is to have a self-centred, independent-standing centre to cater to our customers. We will hire 35 people next year for the testing centre and by 2011-2012 hope to have about 100 people. We want to develop products in Asia for Asian customers.