Timken targets Rs. 1,000-crore turnover in India by 2010
New initiative for large fleet operators launched
Mr. David White, Director - Sales & Marketing
The success of an organization lies in not just selling its products but in building long-term relationship with its customers and sharing knowledge and experience beneficial for the market. This is the secret of Timken’s success in India. The last time I remember meeting executives from Timken was at Auto Expo in 2006 when the company had launched a series of initiatives for the automotive aftermarket business. Since then the company has seen very fast growth in India. In fact, India was the fastest growing automotive market globally for Timken in 2006.
I recently met Mr. David White, Director – Sales & Marketing, for Timken in India, to know more about the company’s operations in the country. He spoke at length about the company’s growth strategy for the OEM and aftermarket business, Timken’s Tech Centre in Bangalore, the needle roller bearing business and the new facility coming up in Chennai.
The following are excerpts from the discussions with Mr. David White:
Strengthening OEM relationships
In India it’s a combination of organic growth in Timken’s existing customers like Tata Motors, Mahindra & Mahindra and Ashok Leyland, coupled with many new applications developed for new vehicle and component manufacturers. Today Timken has been able to achieve a double-digit growth with the existing commercial vehicle business.
The way the company has achieved this growth is very different from the way it has worked in the past.
In the commercial vehicle product segment, there are products which have been around for a long time, and the product designs are undergoing a major change. For example, Timken and Ashok Leyland set up a collaborative team to work on areas which would help the latter save some cost on processing, logistics and designing. The collaborative team actually managed to effect an annual saving of more than Rs. 50 lakhs for Ashok Leyland. Changes were made in consolidation of process, assembling process, packaging and new concepts around the product.
OEMs are now rationalising vendors who are traditional suppliers of products from those companies who are supplying products as well as providing solutions, which actually result in significant design improvements and cost savings.
Timken has been in India for more than 15 years now and has established very strong relationship with its automotive customers. With groups like Mahindra & Mahindra, the company has managed to strengthen the relationship even further: The company is not just a supplier of components, but also procures raw material from Mahindra Ugine Steel, and also a tenant of Mahindra World City (SEZ) near Chennai.
Sales growth and targets
Timken is all set to achieve a Rs. 1,000-crore turnover in India by 2010. The targeted turnover covers all business units, including automotive, industrial, rail and off highway vehicles. The automotive segment alone constitutes about one-third of the overall business for Timken.
Timken has a particularly strong presence in industrial applications. With huge infrastructure growth in India, the company has had exponential growth in off-highway, heavy industry, railways, machine tools and the industrial aftermarket. To Timken’s benefit, the company has limited exposure in all these segments. This ensures that any cyclical downturn in any segment doesn’t affect the overall business.
Is there a slowdown?
The current year has been particularly tough for the automotive industry. All major manufacturers have announced cut in production.
But, as mentioned earlier, India is one of the fastest growing automotive markets for Timken, and the company is not just working with a few OEMs for regular business, but also working with the existing OEMs and new customers on a lot of new products. Timken has gained a significant share of business from its long-term customers.
Besides, in the last 10 years Timken has never seen so many new automotive projects coming up in India. As vehicle technology advances fast and as global players and Tier 1 component manufacturers are setting up business in India and with companies like Tata Motors, M&M, Ashok Leyland, Honda Motorcycles and Scooters and Bajaj developing some of their own designs indigenously, they are using global levels of technology in their vehicles. That’s exactly where Timken fits in. Anti-lock braking systems, steering systems, automatic car transmissions, etc., are areas where Timken has its strengths globally and is able to share its global expertise with Indian companies as well.
The company has never worked on so many projects as it is doing today. By the end of 2007 Timken would have a majority market share in the accessories market for needle bearings. The company is already working with virtually all the steering manufacturers. So the new product groups have grown in size and stature because the Timken’s technology that is the preferred choice of most of the global product segments.
New plant in Chennai
Timken currently has its manufacturing facility in Jamshedpur which makes 0-8 inch tapered roller bearings. The company is setting up a new facility in the Mahindra World City outside Chennai, which would manufacture larger bearings. These bearings are typically for tractors, off-highway vehicles, power transmission applications and railways.
The initial investment in this new facility is around Euro 25 to 30 million, and it has the capacity to generate business worth Euro 50 to 70 million per year. The proposed second phase of the project envisages doubling of investments and revenues.
India is most globally integrated for Timken!
Timken has been present in India for the past 15 years, and today the Indian has become probably the most globally integrated part of Timken’s business anywhere in the world. The Jamshedpur facility manufactures both for the domestic market and for exports. India is also the global centre of excellence for railway business; Jamshedpur has the largest facility in the world to manufacture bearings for railways. Similarly, the Timken Technology Centre in Bangalore handles engineering operations for both international and domestic markets.
The new facility in Chennai is also going to be leveraged for augmenting the core business. Sales of products manufactured locally constitute 60 per cent of Timken’s domestic business and that of imported items accounts for the balance.
Timken also sources nearly $ 40 million worth of components from Indian component manufacturers for its global manufacturing facilities. The company sources low-to-medium value components from Indian component manufacturers for the global network. This shows how Timken’s Indian operations are highly integrated with its global operations.
Timken Technology Centre
At the Tech Centre we have 400 associates. In fact, over the last few years its interaction with Indian customers is on the increase. Automotive, railways and heavy industry customers regularly interact with the Tech Centre engineers on a regular basis.
Timken is also working with some of the major Indian OEMs on their new product developments. For example, Timken’s Technology Center supported axle development for a new vehicle at M&M. The project went from the white paper stage to contract signing in just 40 days.
The Timken Technology Center is in operation since last nine years. Application engineers here are trained in advanced automotive applications. It initially started as an EOU and gained knowledge and engineering core talent through interaction with global clients. With Government policy changes, the center is able to take advantage of its global experience and is using for the advantage of its Indian customers. Not a week passes without at least two customers visiting the centre to work on a new project.
After market initiatives 
At Auto Expo 2006, Timken launched three new initiatives for the automotive aftermarket. It launched Timken Premium Automotive Grease, expanded the ball bearing range and also started the concept of Timken Service Points.
All these initiatives have done well. The Timken Premium Automotive Grease has been a runaway success. As the truck industry matures, traditional owner-operators grow into larger fleet operators. As they grow bigger, the attitude of the truck owner also changes: he stops looking at his truck as just a possession but as an asset, which he has to maintain properly to fetch better returns.
The Timken automotive grease and the product line in general fits in with this value proposition. As is always said, fit a Timken bearing, lubricate it with the Timken automotive grease, and you can send the truck out for 75,000 km before it comes back for re-greasing. That is great performance for any truck.
The Timken automotive grease, if used on an average Tata or Ashok Leyland vehicle, could annually save the operator anywhere between Rs. 5,500 and Rs. 7,000 since the product ensures much longer lube intervals and also lesser wear and tear of bearings and other components. So, if the operator has a fleet of 100 vehicles, he saves Rs. 7,00,000 a year just by using a complement of Timken products.
The second initiative launched a year back related to expanding the Timken ball bearing range in the aftermarket. This has had a lot of positive impact, with customers appreciating the fact that the company is expanding its value proposition to a lot of other applications.
The third initiative has been the Timken Service Point. In the last 18 months Timken has established over 40 service points across the country. The primary users are the small and medium fleet owners who own between 20 and 50 trucks and have started adopting better operating practices. They can’t afford to have their own garages; so they go to their trusted mechanic. The fact that these mechanics have been trained by Timken and are using Timken products has created a lot of trust and confidence among fleet owners.
Currently, the company has 40 outlets. It is planning to expand the network across India in due course. Several workshops have now approached the company for becoming a Timken service point, with both fleet owners and mechanics finding added value in it. The company is planning to have a 100 Timken service points in place by the end of next year.
Shrinking aftermarket business
Recent Government regulations have prohibited overloading of vehicles. The new generation of trucks have undergone vast changes with new design wheels and axles. Improved vehicle systems and road infrastructure are slowly making bearings a non-replacement part. Bearings are being designed to last for a lifetime. So the aftermarket business over the years would continue to shrink if all other variables remain the same.
But in the last two years Timken has had positive growth in aftermarket business. Timken has grown by showing its end-users ways of reducing the cost per tonne per km. Cheaper; lower-cost bearings are not going to reduce the cost of operation. Fleet operators have realized this and have started using Timken products.
LFO Programme
In the automotive aftermarket, Timken is prototyping and testing a concept of direct business with large fleet owners. A lot of really big trucking companies owning 200 to 1,000 vehicles are setting up their own infrastructure for servicing. They have realized that it makes sense to do service in-house rather than send the vehicles outside. These fleet owners are growing bigger, and so Timken has initiated a programme which specifically targets their needs.
The company is not just selling products direct to fleet owners but is also providing up-front mechanic training and ongoing technical support. Basically Timken is sharing its expertise with its customers to help them that they save money. Training which is provided absolutely free of cost is more of an exchange for the regular business provided by the fleet operators by using Timken products.
The LFO programme was started at the beginning of this year. This concept which is under testing right now has been a runaway success for Timken. For the fleet owner the value proposition is that mechanics will do the servicing right and can do away with spurious bearings available from outside sources. This also gives the customer direct application support from Timken.
In fact, like the Timken Service Point model, the LFO is a totally new concept developed first in the Indian market. The company has selected key customers in each region and testing this concept.
Timken is quite sure that this would probably take the same path as the Timken service point initiative which, when started, was tested in a phased manner. Later clients started approaching the company for being part of the initiative.
Needle roller bearing business 
Within a short span of time Timken has garnered significant marketshare in needle roller bearing business. Products like automotive accessories, starter motors, air-conditioning compressors, steering wheels, steering gears, steering columns, energy absorption columns are all the new products into which the company is installing needle bearings.
Most Timken needle roller bearings are imported at present. To the automotive industry’s benefit, India has become a much more open market and the volumes in most global automotive needle applications are very high. Most of what is used in India is of global designs, and with India’s current volumes, it is more cost-effective to piggy-back on the global manufacturing facilities of Timken which produce astronomical volumes of these products.
On the other hand, India is a huge market for motorcycles, and in the longer term, Indian would become a base for small engine technology. Timken will continue to grow this part of its business both as a technology partner and a volume production market. The company is working on next generation designs for many two-wheeler applications.
The legacy products that Timken currently offer have been there for a while. Timken’s value proposition comes in higher power density, higher speed, higher loads and higher temperatures-all the things that motorcycle engines are moving to, in the next generation of products.
Manufacturing needle roller bearings in India
India is definitely a low-cost labour manufacturing base. But for bearings, a good portion of the overall cost base is tied up in power, raw material and capital. Power in India is very expensive, and raw material costs are again shooting. So in the short term the company would continue to import low volume sizes, but once it gains considerable volumes, Timken would consider producing a broader line of needle roller bearings in India.
Challenges
India is growing so fast that product availability in large industrial markets is a major issue. There is also going to be a shift in the kind of customers that India develops. Companies are working hard on product development, shortening product life cycles, accelerating product development times, and this is the natural way forward.
The challenge that Timken faces is in selecting those customers who will succeed through continued focus on product development for both India and global markets as well.
Government policies
As regards policy changes, the Government is going in the right direction by getting integrated into the WTO. The government needs to accelerate its tax normalization policies – sales tax, VAT and excise. It is cumbersome when a company must design its business model around a tax regime, and it adds cost for the customer.
Infrastructure is getting better, the speed of delivery is getting faster, and this results in shorter logistics times between source and customer.
Inorganic growth
Timken is looking at some options for inorganic growth. The thing about growth is that you always hear about M&A activity during the upside cycles. It’s a tough time to buy somebody because when you look at share prices today, companies come at really high prices. There is a very strong gravitational pull for other manufacturers who offer complimentary products toward Timken.
Timken’s value proposition for customers is not just selling more bearings, but improving power density, reducing the overall operating cost (like what the company has done with several Automotive, Rail & Steel customers), putting together a value proposition that differentiates it and makes the customer’s business better and more profitable. Sometimes it can be done by making something new or by making better bearings or by making more fuel efficient engines.
More often the company does it by aligning its skills with the needs of a particular segment, like in the case of Timken Premium Automotive Grease where it tied up with a very good lubricant company, worked with them in developing a world class product with the right chemistry for local operating conditions, and sold it to the commercial vehicle aftermarket under the Timken brand. So for selling greases its not necessary that you have to buy a petrochemical company.
Globally, Timken has been most aggressive in the past 2 to 3 years in acquiring companies which complement its existing aerospace products. Globally aerospace is growing very fast for Timken.
Cheap/low-cost bearings
Low-cost imported bearings will definitely hurt small domestic bearing manufacturers. But the leading companies in any industry have figured out a way to differentiate themselves. Low-cost sources will keep companies very lean and fit, but the really good companies will always offer a value proposition which is much superior from a low-cost source.
When a market is growing fast, you have companies that are able to hold and ride the growth despite their inability to really remain competitive. Its unhealthy for the industry in the long term to have these suppliers, but in short-term it augments the market’s fast growing demand. But when there is a slowdown, companies which haven’t invested in technology and fail to adopt global practices will definitely feel the heat.
Global scenario
Timken globally clocked a turnover of just over $5 billion in sales. The company sold a big part of its steel business last year, which allowed us to better focus on the core and value adding pasts of our business. Globally, the automotive is challenged by the slow down in North America, but Timken has counterbalanced this impact with very fast growth in new markets like India.
