Half awake at 8:30AM today I was sitting in the ball room of Vivanta Taj Connemara hotel – waiting for the IACC Breakfast talk by Dr.M.Manickam (Chairman of Sakthi Auto components & other group companies) to begin, I was not sure on the connection with the US market & Dr.Manickam. How ignorant I was about Sakthi group & Indian companies silent march abroad!
Mr.Manickam is 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 their (Sakthi Auto components) foray to Detroit (the lost city of USA now). Below are few points from 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). First thing we did was commission a survey to understand our future employees. We found only 28.9% children are growing up in household with both the parents around. A typical day for our worker (single parent) will be leaving the kid in a day care at 8AM, to pick them back by 3pm 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 are home, they don’t get to cook and pay the kids to eat (junk food) outside. We decided to start an in-house day care and extend take out food from our canteens in our factories. That generated lot of big positive energy, I was invited to meet the mayor, then the state governor. It all went surprisingly smooth
- In Detroit city at a site five minutes drive from headquarters of GM, we bought a 70 acre facility. Costed us $10 Million, out of which we got a grant for $7 Million, so nett 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 similar price, we are getting $600-700K rent per annum
- When we advertised for “Qualified” Assembly line supervisors, we hardly got response. The only one’s 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 US as per law there. The reason for absence of supervisors in younger population was because US had stopped manufacturing 4 to 5 decades back. From 1960s first to Japan, Mexico, ASEAN and now China, they have off-shored their manufacturing; those skills were nearly extinct in US till 2010
- US consulate in India extended us 30 Green cards for sending our staffs from India (and rest of the world) to USA. But we wanted to use it wisely. We wanted to send staff from India for 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 generation 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 outside India was Portuguese. Their engineers are the best I have seen anywhere in the world and they gave us lot of good technologies, which improved our quality worldwide. In Portuguese even though we own majority, we are only a shareholder. We don’t have any Indians working there, not even as a 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 lot of problems, surprisingly we found in our case, German engineers to be incompetent and we had to bring in the portuguese engineers who were able to double output with just two quarters. The German government was less open for foreign companies (like in our case non european) doing business there. For example in Europe (in general) there is 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 works, but on training, which we did take 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 manufactures in India. When we went to Europe we ignored this and begun working with truck manufactures there. They didn’t have a concept of (Japanese) Kanban. Supply chain/Inventory was reviewed every quarter (!), which all sprung as surprise and hit us badly there
- Based on my experience of doing business around the world (over 20 locations) I feel in India when somebody commits does 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 USA for example E & Y proudly claims that they are the Auditors for Coco-Cola for last 100 years, in India they can’t say that as there term can’t be more than 3 years
During Q & A, when I asked Dr.Manickam on 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 realized 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 USA. It is always best to let the local’s run the show (plant).