Global Fastener News

Indian Firms Scout Distressed U.S. Auto Parts Companies

Jason Sandefur

Indian auto parts makers are looking to gain a foothold in the U.S. and Europe by buying distressed firms in order to access technologies and clients, Reuters News reports.
In the last five years, auto component exports from Indian firms, whose manufacturing costs are up to 40% lower than in the West, have grown at 25% annually. Consults forecast India’s exports could reach $25 billion by 2015, by which time nearly 40% of an estimated $1.7 trillion auto components is likely to be outsourced to low-cost countries.
India has 450 firms making branded auto parts, with another 5,000 in the generic parts market. Most of these companies are clustered near the car making hubs in New Delhi, Mumbai and Chennai.
Firms such as Sundram Fasteners, Bharat Forge, Amtek Auto, Motherson Sumi Systems and units of Tata Motors have made acquisitions worth nearly $120 million within the past year. “Deals such as these will accelerate because growth in the auto sector in the West has almost flattened, but that’s where the manufacturing capacities are,” said Vishnu Mathur, executive director of the Auto Components Manufacturers Association.
Ford, General Motors, Honda, Toyota, DaimlerChrysler and Hyundai are also looking to increase their presence in such rapidly expanding markets as India and use it as an export hub.
“It’s about getting access to higher skill levels, a global customer base and building scale. In this business, scale really matters,” said Praveen Kadle, finance director at Tata Motors. Tata has bought insolvent German firm Wundsch Weidinger and has numerous joint ventures with such companies as Visteon.
However, analysts caution that global acquisitions may not be a panacea for all Indian firms, and that some also lack the resources and the ability to integrate overseas operations. Lacking clout, smaller firms are particularly vulnerable. Also, the reduction in import tariffs and a free trade agreement with Thailand can also blunt their cost advantage, according to Reuters.
“Some firms may be biting off more than they can chew,” said an auto analyst at Kotak Securities. �2005 FastenerNews.com