SKF Bearings's strategy

By K. T. Jagannathan

CHENNAI, OCT. 4. Even with a combination of factors, within and outside, heightening competition, SKF Bearings India has drawn up a three-pronged strategy to stay ahead of others in a situation where margins have come under intense pressure.

The new gameplan has already seen SKF Bearings cut costs wherever possible, reach out to end customers and take prudent recourse to outsourcing.

``We now want to move our investment to market place," said Mr. Torsten Nordgren, Managing Director of the company. The `outsourcing exercise' that the company has begun to pursue of late makes quite a sense given this objective.

Mr. Nordgren said the company had already started outsourcing low value components from `competent suppliers'. In fact, it had even wound up its IT (information technology) wing and begun outsourcing the service. The IT wing ``has been taken over along with its personnel by Electronic Data Systems, Chennai," he said. ``In olden days when the Indian market was protected, we have to produce everything - from valves, gauges to furniture. We are now sourcing these products from good and competent suppliers," the MD said. The objective was to ensure that the company remained focused on its core business.

With the automotive industry going through a rough time, SKF Bearings, Mr. Nordgren said, was consciously striving to pare its dependence on this sector which was ``experiencing big swings in business cycle." The company had now trained its eyes more on other segments such as industrials, after-market sales and the like. Yet, he was quick to assure that the automotive sector would still contribute to a big chunk of its business. At present, about 40 per cent of its revenue comes from sales to the automotive segment. In this context, he explained the efforts taken by the company to provide new solutions like the introduction of a complete bearing hub to retain its share in the automotive field. In fact, the company had invested heavily over the past few years in its Pune facility to design new bearing solutions like this one, he said. Ford, Telco and Fiat were among the car makers who got supplies from SKF Bearings. The company had now started supplying to Volvo too. An upgraded Pune facility had started exporting as well. The Bangalore unit had already been catering to the needs of select overseas markets.

Over the last three years, the manpower had been slashed by around 800. Simultaneously, the Pune factory was upgraded so as to make high value bearings. Now the company, he said, would focus on customers. It had drawn up a series of initiatives aimed at improving customer interface. A significant constituent of this exercise would be alliances with distributors so as to become a part of their network which sold `packaged kits' and not just a single bearing.

Mr. Nordgren said the company would continue to look for opportunities to cut costs. In this context, he said the company was closely monitoring sales and administrative costs. He said the proposed rights and non-convertible debenture issues would primarily help recast debt and the capital of the company. ``We have very high financial costs,'' he said. The parent company, he indicated, would pick up any unsubscribed portion of the rights issue.

``India is an important market for SKF in Asia. SKF is committed to invest and strengthen our position in India. The challenge we face in a market which is less positive is to continue our restructuring job so as to continue investment," he said.

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