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BW Businessworld

'We Want To Export More'

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Gothenburg, Sweden-headquartered SKF is the global leader in the bearings industry, with its founder having pioneered this industry. Besides bearings the company operates in seals, lubricants, power transmission products apart from services. In 2010, SKF had revenues of $8.82 billion and a net profit of $743 million. SKF, which is currently celebrating the 50th year of manufacturing operations in India has six manufacturing facilities across the country. Tom Johnstone, CEO and President of SKF AB, who was in India recently to inaugurate the global technical centre in Bangalore, met BW's Venkatesha Babu. He spoke about why India and China will be key to SKF's future. He was joined by SKF India's MD and CEO Shishir Joshipura.

Excerpts:

Some segments of the market that SKF operates in, like bearings and power transmission products, are seen as those which are like the canary in the coal mine, giving out early warning signals of the global economy. What is the sense you get? Are things as bad as they were in 2008?
I think it is different from what it was in 2008-09. That (recession) came on the back of six-seven years of continuous growth. In 2008, there was a correction in both demand and subsequently, a huge inventory correction. In volume terms in 2009, we were down by a quarter compared to the previous year. That was a strong correction. This time it is different as certain sectors continue to do well, while others do not.

For instance, in Europe both the car and heavy-truck market is in trouble. Next year some players in those segments are talking of double digit declines. Even in China, for instance, the wind energy business and railway business which over the last few years boomed is in a correction phase. However, the broad industrial business on a global basis continues to do well for us. Sequentially we have seen leveling but no decline in business. In North America, segments like highway equipment, gear boxes, fluid power and compressors are still seeing growth.











FAST FACTS
SKF AB
Incorporated: 1907
Headquarters: Gothenburg, Sweden
Businesses: Bearings and units, Seals, Mechatronics, Services and Lubrication Systems
Network: 140 manufacturing sites  in 32 countries
No of employees: 44,742

In India too, segments like machine tools are doing well whereas, power and capital goods are seeing a major slowdown. Asia is a very important market for us constituting 27 per cent of our business now, up from 13 per cent just eight years ago.

While you have had manufacturing facilities in India since 1961, nearly half of your India revenues are still generated by trading.  The apprehension has been that SKF India's manufacturing has been geared  to cater to the low-end commoditised part of the business and the parent company has been averse to share technology to manufacture the high-end stuff?
That is not true and factually, it is incorrect. Yes, you are right that nearly half of SKF India's revenues come from trading but the equipment we put in here for manufacturing is world-class and is absolutely the latest technology. If you go to our Haridwar or Ahmedabad factory, the technology is the same as that in Gothenburg, Sweden or Schweinfurt in Germany, Dalian in China or Pennsylvania in the US.

Around 15-20 years ago, our manufacturing units in Bangalore and Pune were mainly geared to serving the automotive market. In the last decade, we invested heavily in upgrading our facilities to exactly the same  standards of SKF which we maintain globally. The Ahmedabad facility addresses the needs of the renewable energy market and is of the same global standard. India is a part of SKF's global manufacturing chain. About eight per cent of what SKF India manufactures is actually exported. Yes, we also import a lot. We want to change that balance and export more out of India. Some segments of the market might not have had certain volumes to justify investment earlier.

But once they hit a certain base number we will make those investments. Why just India? Even in China, where we have more manufacturing facilities than India, 60 per cent of our revenues come from trading.

The other worry has been the significant yo-yoing of revenues of SKF India. What are the reasons for frequent fluctuation in revenues?
You can't run a business on a quarter to quarter basis. You will see fluctuation in business. Last year we opened two new factories. I am here to inaugurate a technical centre. We are making additional investments to open a facility in Mysore. Remember, we have been in India since 1923 and the manufacturing started only in 1961.

In India we operate in all the major technology areas that SKF does globally except for manufacturing of mechatronic products. Our aim is to over a period of time grow the other segments of the market, since bearings is a relatively mature market. We are setting up the global technical centre to develop products for both our local as well as worldwide customers. India is a key part of the SKF global family.

(This story was published in Businessworld Issue Dated 23-01-2012)