2020 has undoubtedly been a crisis year for everyone. How has Schaeffler’s focus changed in this pandemic times? What is the plan of action implemented to ensure renewed focus is achieved efficiently and brings in result?
The corona virus crisis has without doubt affected everyone and Schaeffler India has been no exception. After facing economic headwinds in 2019, we had started the year with an optimistic view. Our sales performance for the months of January and February this year were on a strong track, but even before gaining a complete momentum, the economy came to a grinding halt due to COVID-19 pandemic. However, on a brighter note, with the economy gradually opening up, we are now seeing some green shoots of recovery with demand cropping up gradually across sectors as compared to previous months and we hope that the worst is behind us.
The unprecedented challenges that we are facing due to COVID-19 has also opened up opportunities. The lockdown period gave us enough time and scope for us to prepare and retool for the new normal that we were heading into. We have been able to reassess our business strategies, needs and approaches. We strongly believe that with the right approach and behaviour, we can have a positive impact not only on the organisation but also on the business and the society around us. As such, our response to dealing with the crisis has been in-line with the adoption of the ‘protect, recover, retool’ approach. First and foremost, our efforts have been directed towards protecting the health and well-being of our employees and our facilities. The next step was to restart activities in a safe and cautious manner. And finally, retool and prepare for tomorrow. We strongly believe that three factors, ‘predictability, adaptability and agility’, will play a huge role in defining the organisational performance in the new normal, post the COVID-19 era. Customer centricity has been of the utmost importance to us and we continue to remain closely engaged with our customers at all times. Our capability to predict and forecast our fast-changing customer needs, our mental preparedness towards the impending changes and our agility in responding to the change ahead of the competition stands us in good stead. The recovery will be fraught with uncertainties. But if we stay united and take effective steps, we will overcome whatever we face on the way.
And I must say that the crisis has truly brought the entire Schaeffler India team together. The morale and motivation of our employees has been highly commendable. Across all levels, right from the senior leadership to the junior-most employee, everyone has shown tremendous resilience and agility in quickly adapting to the new normal and ensuring business continuity and safe restart of our plants, warehouses and offices, amidst this pandemic and its challenges. The resilience and tenacity with which the entire Schaeffler team rallied together to work as one cohesive force was at an altogether new level of organisational bonding that became visible. Empowering and trusting each other has been our strength in overcoming the crisis. With a strong focus on innovation, agility and quality, we have managed to keep the ball rolling even in these unprecedented circumstances.
India is now working towards an agenda of ‘self-sufficient’ India. How is Schaeffler India contributing to this movement?
The ‘Aatmanirbhar’ campaign has surely opened up a lot of opportunities for players like Schaeffler India, particularly in sectors such as wind, railways, two-wheelers to name a few. We have been continuously investing in line with the ‘Make in India’ initiatives while taking advantage of our global expertise and range of products. Our aggressive R&D and localisation drive within India in the last two years, particularly when it comes to manufacturing of raw materials and components, helped us become more competitive and gain market share in some high growth sectors and applications. For example, some of our ‘Made in India’ products for the railways sector are not only being supplied to customers in India, but abroad as well, such as metros in Sydney, Melbourne, Perth in Australia, as well as in Brazil. We are the first manufacturers in India to locally develop current insulated bearings. Similarly, we have strong portfolio of localised two-wheeler and chassis products. These are just a few examples from an ever-growing list of localised products across both automotive and industrial sectors.
The prevailing situation has given us an insight into being less dependent on other countries and having local productions, which would enable cheaper and affordable cost of products in the market, while maintaining our product quality and reliability. Going forward we will continue to strengthen our local R&D, innovation and manufacturing capabilities, and hope to play a major role in driving forward India’s ‘Atmanirbhar’ journey.
The shop floor dynamics are now going to change with low staff on ground. How do you think this will affect the productivity? What alternatives have been thought out to ensure productivity levels are maintained?
The manufacturing facilities or plants are considered as the heart of the business. It has to keep beating in order to keep the business running. The COVID-19 scenario presents a unique situation that has disrupted business activities across the world and we too have been impacted by it. No one can really confirm till when will this last, but one thing is for sure, eventually there will be a cure and we anticipate the markets to recover by the end of this year. At the same time, we are getting used to a new way of working. Resilience, agility and adaptability have been our key drivers during these times. While we are committed to meeting our customer needs and assisting them in every possible manner, employee safety continues to remain our topmost priority. As such, we have completely redefined our standard operating procedures to implement all the necessary safety practices of social distancing, hygiene management, use of protective equipment and are complying with all the requirements and guidelines that the authorities have asked us to maintain in this process.
Schaeffler India’s manufacturing plants resumed operations from the 1st week of May, strictly abiding by all the government regulations and safety guidelines, and now we have ramped up to near normalcy in our multi-location plants. Our spirit and passion to WIN remains intact and we are happily embracing the new normal of workplace.
Do you think the automotive industry low is going to adversely affect Schaeffler’s growth? How do you plan on overcoming the situation?
Auto as an industry has been facing headwinds for almost a year now, and hence, we have been combating this situation for a while. The past one year has been very difficult for the sector at large; there have been multiple disruptions that have taken place within the auto sector, transition from BS IV to BS VI, liquidity crunch and increasing cost of insurance are some of the reasons of the slump that the industry has faced.
However, Schaeffler India’s diversified and balanced business portfolio between industrial and automotive has ensured that we are able to keep the numbers in check. The industrial business has been the balancing factor for us and is continues to remain so. Besides, our focused efforts towards cost management and cost flexing have helped our bottom line and protected our margins. Due to this prolonged uncertain environment, we have prepared ourselves to respond to the market with flexibility and agility in coming months. In addition to our continued efforts towards cost management and cost flexing, we will be intensifying focus on working capital management and cash management to ensure financial stability. We are also focussing on increasing our ‘content per vehicle’ value. We will continue to build and leverage our strong presence in the engine and transmission applications with better and new value products.
As one of the leading suppliers of products and systems that help reduce CO2 emissions and protect the environment, we hope to play a proactive role in ensuring a smooth ‘BS-IV to the BS-VI’ transition of India’s automotive industry. We have an excellent mix of old generation BS-IV products and new generation BS-VI products - in areas of whole powertrain, engine and chassis. We have continuously made strategic investments and acquisitions which enable us to be a valuable business partner to our customers. Depending on the market demand, we are fully prepared to quickly shift gears as and when required during this transition period and produce both BS-IV to BS-VI products. This should also help augment our performance in the near future.
What measures do you think can be brought in by the government to ensure the auto industry can pick up the pace of recovery? What are the steps the industry can take within to ensure stable recovery?
In the post-COVID era, personal mobility, in all probability the entry level passenger cars or the A segment will gain prominence. However, despite developing into an essential commodity over the years, they are still considered to be luxury/sin products i.e. in terms of the duty and taxes. Easing the tax brackets to help revive the demand will be a welcome step by the government.
Having said that, the government is certainly taking several steps in the right direction. The implementation of stringent emission norms, CAFÉ norms, the push towards electrification of vehicles with the announcement of FAME 2 scheme are positive steps which must be continued. Furthermore, the government’s proposed ‘Vehicle scrappage policy’, if introduced, would also help bring some much-needed relief to the automotive industry, with owners getting an incentive for selling old polluting vehicles with low value.
We must understand that this was a forced slowdown and not the culmination of anything else. Therefore, as soon as an opportunity comes, things will start to pick up again. We can already see some green shoots in some segments. The government is also focused on restarting the economy and has announced ambitious schemes that will play out in the near term. So, all in all, we have to remain watchful, commit ourselves to safety, hygiene and discipline, while remaining flexible and agile.
Schaeffler was intending on developing Asia as its innovation hub. How far has that plan been successfully implemented? What is India’s contribution going to be now in this plan?
From the beginning of this year there has been a change in the reporting structure for Schaeffler India. So far, we were aligned with the European business but from January of this year the Indian business is now part of the APAC region. The vision behind this move has been to open up the South East Asian market for the Indian subsidiary with strategic priorities more aligned with Asia rather than with Europe. We believe that our bearing plants in India have a huge growth potential in the entire Asia Pacific region, particularly on the industrial side of the business. This will not only be beneficial to our business but also to the overall Indian economy.
Schaeffler is an organisation whose business strategies are based on innovation. We develop our technologies mostly centrally. At the India level, we spend 1 to 1.5% of our earnings in R&D and we will continue to do so, as we believe that it is investment for the future and for any technology company, it is extremely important. Schaeffler is a global company with focused local presence. Until recently, we were bringing the innovative products built by our parent in Germany to India, localising them and then going to market.
Over the past two years, however, we have built two R&D centres (in Pune, Maharashtra, and Hosur, Tamil Nadu) to develop innovative products locally and become self-sufficient. We have already established an Incubator Competency Centre at our Pune plant for two-wheelers and agricultural machinery, wherein we are already working on several local innovation projects leveraging local competency, infrastructure and local networks. The company plans to keep the highly skill-based critical operations to itself while outsourcing the non-core operations to external agencies. Schaeffler has already set in motion its plan to invest ₹1,000 crore over a period of three years. As far as India is concern, we are looking at the country as a design house, making sure we have design capabilities here.
What changes do you think will be coming into the manufacturing industry, in general, post the unlocking? How are you preparing yourself to cater to those changes?
As business gradually emerge from the pandemic, the manufacturing industry could witness a mass adoption of automation technologies, such as robotics, Artificial Intelligence and big data, replacing some of the repetitive human jobs. Robots and cobots will gain prominence as a new normal in the post COVID-19 era. The affordability of robots have gone up in the past few years and post the pandemic one can witness an acceleration in their adoption rate in the manufacturing industry.
While the risk of job redundancies due to this loom ahead, the adoption of technology will also help create more new and interesting job opportunities. New work models will emerge creating new job roles. The adoption of automation technology will give an opportunity to organisations to raise the capabilities of employees higher up in the value chain and move them towards more critical roles. As the industry gears up for rapid adoption of technology and automation, there will be a transition in skill requirements. Hence, one must quickly adapt a mindset of continuously evolving and learning new skills.
We strongly believe that three factors – ‘predictability, adaptability and agility’, will play a huge role in defining the organisational performance in the new normal, post COVID-19 era.
Ensuring consistency in quality, quick response to market demands, judicious use of capacities and innovation will play a key role. At Schaeffler, we have been focused on agility for a while now, as we are challenged by rapid changes in the technology landscape. We are already investing for the future, today. We have made strategic acquisitions in the field of e-mobility, Industry 4.0 to add those capabilities. On the human front, we have been taking proactive steps to ensure that our employees quickly adapt with the changing times. The lockdown period has provided an ideal opportunity for our employees to learn and enhance their product and technical knowledge through various online training programs.