Listen to the leader – Dr Manickam Mahalingam

Half awake at 8:30 AM today, I was sitting in the ballroom of Vivanta Taj Connemara hotel, Chennai – waiting for the IACC Breakfast talk by Dr M Manickam (Chairman of Sakthi Auto components & other group companies) to begin. I was not sure of the connection with the US market & Dr Manickam. How ignorant I was about the Sakthi group & the Indian companies’ silent march abroad!

Mr Manickam is the son of Industrialist and Philanthropist Dr S Mahalingam (who passed away recently). Mr Manickam was introduced as a man wearing multiple hats with ease – led Sakthi group’s turnaround across industries (Auto, ABT, Sugar, Bottling), manages many colleges & an accomplished winner in Rowing competitions; I got impressed, by then I was wide awake and started to pay attention.

Manickam began his talk by talking about their (Sakthi Auto components) foray to Detroit (the lost city of the USA now).  Below are a few points from the rest of his talk (any paraphrasing/error should be attributed to my incomplete notes).

• Two years back, we started in America, we went to Detroit city (our customer General Motors invited us there). The first thing we did was commission a survey to understand our future employees. We found that only 28.9% children are growing up in a household with both parents around. A typical day for our worker (single parent) will be leaving the kid in a day care at 8 AM, to pick them back by 3 pm or pay $20/hour late fee. They were incurring $1000/month for day care expenses. They were doing long commutes, as a result, by the time they were home, they didn’t get to cook and pay the kids to eat (junk food) outside. We decided to start an in-house daycare and extend take-out food from our canteens in our factories. That generated a lot of big positive energy. I was invited to meet the mayor, then the state governor. It all went surprisingly smoothly.
• In Detroit city, at a site five minutes drive from the headquarters of GM, we bought a 70-acre facility. It cost us $10 million, out of which we got a grant for $7 million, so the net cost of $3 million. Our entire experience, including this grant and land buying, all got done without meeting anyone (government officials) in their houses (unlike in India). In another facility we bought for a similar price, we are getting $600-700K rent per annum.
• When we advertised for “Qualified” Assembly line supervisors, we hardly got response. The only ones we got were 70-year-old people with walking sticks; we took them and trained them, as age can’t be a recruitment deterrent in the US, as per the law there. The reason for the absence of supervisors in the younger population was that the US had stopped manufacturing 4 to 5 decades ago. From the 1960s to Japan, Mexico, ASEAN and now China, they have off-shored their manufacturing; those skills were nearly extinct in the US till 2010
• The US consulate in India extended us 30 Green cards for sending our staff from India (and the rest of the world) to the USA. But we wanted to use it wisely. We wanted to send staff from India for a shorter duration, so that we could rotate them
• In China, we got the whole facility, factory building, including staff quarters, for free from the city. The city constructed it and handed it over to us; the construction quality was world-class. The city did that because we were generating employment for 350 people. In China, we didn’t go alone; we have a local partner owning 50% who basically runs the operations for us, and that’s working great for everyone
• The first country we went to outside India was Portugal. Their engineers are the best I have seen anywhere in the world, and they gave us a lot of good technologies, which improved our quality worldwide. In Portuguese, even though we own the majority, we are only a shareholder. We don’t have any Indians working there, not even as a Director or our representative. If we had done that, that representative would become a power centre. Also, we don’t understand the local laws, we don’t want to do anything wrong and get prosecuted
• The experience was not smooth/similar across Europe. When we got a factory in Germany, we had a lot of problems. Surprisingly, we found in our case, German engineers were incompetent, and we had to bring in the Portuguese engineers, who were able to double output in just two quarters. The German government was less open to foreign companies (like in our case, non-European) doing business there. For example, in Europe (in general), there are benefits like the Government paying up to 80% of wages when you don’t have any orders. You can’t use the workforce time for job work, but for training, which we took advantage of the benefit. Portuguese extended us the benefit, but Germany & Sweden were reluctant to do as their interpretation of the law was conservative for outside European companies
• An “experience” guided strategy for us is to avoid working with truck manufacturers in India. When we went to Europe, we ignored this and began working with truck manufacturers there. They didn’t have a concept of (Japanese) Kanban. Supply chain/Inventory was reviewed every quarter (!), which all sprang as a surprise and hit us badly there
• Based on my experience of doing business around the world (over 20 locations), I feel that in India, when somebody commits anything wrong, we don’t punish the guilty, but let them go free by punishing the system. Look at what’s happening with the new Companies Act in India (it’s not thought through well) or the numerous other regulations. In the USA, for example, E & Y proudly claims that they have been the Auditors for Coca-Cola for the last 100 years. In India, they can’t say that as their term can’t be more than 3 years

During Q & A, when I asked Dr Manickam how he prepared the top management & culture of his company before venturing abroad, he jokingly remarked that they first went to Orissa (Odisha), which prepared them well. In Orissa, they had tried to change the local workers, but realised that didn’t work; they had to change, not them. The locals had  (valid) reasons why they work the way they do, and that’s what will work there. Now, Sakthi Auto follows the same model from there to all other locations they operate – whether it is Portuguese or China or the USA. It is always best to let the locals run the show (plant).