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Monday, March 2, 2009

Setco Automotive Limited:-Ceo speaks about future prospects

q)What is your outlook on the auto ancillary sector in India? What according to you has been the impact of global slowdown on auto ancillary industry?

ans)Auto industry has cyclical trends and in my three decades of experience I have witnessed this cycle repeat every 5/6 years though intensity differs. Considering India, in recent years has emerged as an important hub for global majors offering Low Cost Country advantage with a quality offering. Thus the industry has to face a double impact – impact of global slowdown and Indian slowdown. Demand from OEMs has sharply dropped. However, global companies depending on After Market segment are affected somewhat less.

q)What measures is the company taking to offset the shock of the downward trends in auto ancillary industry?

ans) We are like a Palm Tree. When we are hit by a cyclone, we respectfully bow and let it pass through over us and once it is gone we stand back to normal. While going was good in recent years we were totally focused towards pursuing growth oriented strategies and had little time to spring cleaning. We would like to take advantage of this phase to clean our house, focus on costs, improve productivity and review our processes. This will help us be ready to face the next phase with vigor and vitality. Also while we are effectively cutting costs, we are focusing on new product development, which will carry us through the next up cycle on the global front (where our focus is intensifying).

q)According to the Society of Indian Automobile Manufacturers (SIAM), Auto industry has registered 12.32% decline in October 2008. How far could this impact your profit margins?

ans)Yes, being a Tier 1 Auto Component company our fortunes directly swing with those of Auto Industry. In the current quarter our sales to OEMs have certainly come down but we are able to neutralize this to an extent as our Exports and After Market business has been gaining strength. Also our new product development outside of clutch and within Automotive will add more value.

q)Being India`s largest manufacturer of premium clutches for medium and heavy commercial vehicles (MHCV), what is your competitive edge in the industry?

ans) We encourage entrepreneurship in professionals and are proud to have the right blend. Our approach is Customer centric and with quick reflexes we work towards total satisfaction to earn their confidence in us of being a dependable sourcing partners. This is made possible by our approach of market driven R&D structure. We constantly work towards product as well as process innovations ably supported by our faith in Quality Systems. We are nimble footed and have imbibed culture of Change Management which we practice across the board. We believe in not just creating a process but rigorously running it, thus creating an environment of independence and deliverance.
q)Setco Automotive has been growing since inception. What is your perception about the current numbers and what would be your company`s short term and long term strategy in the next 2 to 3 years?

ans)While the current sales forecast has been hit with the downturn in the OEM market, the aftermarket and exports are picking up. We do see a quiet 2009-10 but we do expect that there after a revival in the industry.

q)What situation the company`s two overseas subsidiaries, in the US and UK are facing in these tough times?

ans) Our UK subsidiary has stabilized over the last 3 years and is performing well. Apart from manufacturing clutches, they are our key resources for Design and Development. They are our eyes, ears and arms to face future by preparing the company to meets challenges of tomorrow. In the second full year of its operation since acquisition, US subsidiary has stabilized now and has started contributing to our growth aspirations. In the US we are not totally dependent on Auto sector as apart from Clutches we also have presence in other industries such as Construction and Off Highway Equipments, Marine, Hydraulics etc. Thus we are not so adversely impacted there.

q)Setco Automotive has recently entered into a pact with FTE automotive. How has it added to the growth numbers of the company? Could you spell out the company`s expansion plans?

ans) Early this year we signed a JV agreement with FTE and we are in the process of acquisition of land and setting up plant. In the meanwhile we are closely working with customers on product development in new platforms. FTE range of products are tailor made to suit individual vehicles hence we need to work closely with customers right from the beginning of vehicle development stage, therefore a longer period before initiating sales. So far the progress is as per plans and we see plant commencement from middle of next financial year. Our plans are to first come out with Hydraulic Clutch actuation System before looking at other products from FTE portfolio.

q)Has the company`s customer base been hit, as most of the Indian commercial vehicle manufacturers are facing tough times?

ans) We have a relative small customer base and unfortunately all have been passing through difficult times. We are with them today as we were in the past when going was good.

q)Could you brief us about the new facility in Uttarkhand which commenced operations in the month of April 2008?

ans)Uttarkhand facility was conceived to service fast growing demand for Clutches in After Market Segment. The unit is fully operational now. Our young professional team of about 50 have settled down and picked up skills well and are working at higher productivity levels compared to our Kalol unit.

q)How fruitful is the Setco -FTE joint venture to manufacture and supply clutch actuation systems in India?

ans) While it is too early to specifically state anything at this stage, going forward we see our strategy falling in right place to lend support to business growth, not only in Clutches but also new products

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