Engineer making a big noise
By Amy Kazmin
Published: April 8 2009 03:00 | Last updated: April 8 2009 03:00
In India, one of the most used components of any motor vehicle is the horn. Drivers navigating livestock, pedestrians, animal-drawn carts and motor vehicles lean heavily on their horns to express frustration, if not to clear a path. Trucks are emblazoned with the slogan "horn please".
Responsible for much of India's distinctive road noise is Roots Industries, a small private company that is also the country's biggest hornmaker. It was founded in 1970 by K. Ramasamy, a US-trained automotive engineer, now 60, who has been obsessed with auto horns since his childhood in an affluent land-owning family near the southern town of Coimbatore.
Mr Ramasamy's fascination stems from his father's habit of installing a German-made Bosch horn in every car he acquired. "He said no Indian horn would last," Mr Ramasamy recalls. "It stuck in my mind that I should make horns similar to Bosch, so we would not need to import."
Little known outside the auto industry, Roots has quietly integrated into the global economy over the past 15 years or so, supplying both leading Indian vehicle makers such as Mahindra & Mahindra, and foreign marques such as Harley-Davidson. Throughout most of 2008, Roots ran three shifts a day, six days a week, turning out 400,000 horns a month for its home market and for export.
Now, as global vehicle sales have slumped, Roots has cut production to two shifts a day, five days a week, to make 173,000 horns a month. It has cut its workforce by 25 per cent to 875, mainly shedding single young men. But with one Indian worker often supporting up to five people, Roots has also sought to slash labour costs by reducing shifts and salaries rather than by shedding workers completely.
"It is predominately a social responsibility to keep them as far as the company can withstand," Mr Ramasamy says. "They don't have any facilities like unemployment benefits."
Despite the difficulties, Roots' revenues for the year ending in March 2009 are Rs965m ($19.3m) although they are expected to fall below Rs900m in the year ahead.
The challenges confronting Roots are typical of those facing the countless small manufacturers that helped drive India's years of fast growth and are now struggling to survive the global downturn.
After India loosened its tight economic controls in 1991, numerous private entrepreneurs such as Mr Ramasamy emerged from traditional landowning and trading families to meet pent-up domestic demand for manufactured goods and tap the new opportunities offered by globalisation.
But after ramping up operations, these small manufacturers are reeling. "People didn't believe that growth would slow down," says Subir Gokarn, chief economist for Asia Pacific for Standard & Poor's.
Indian manufacturers are theoretically bound by strict labour laws that make it hard to shed permanent workers. In reality, many factory owners in the worst-hit sectors have simply ceased operations and closed their premises as they wait for the global economy to recover.
Roots employees have long re-ceived monthly statements of the company's performance and have stoically accepted their falling pay, says Mr Ramasamy. "We have profit-linked salaries for everybody," he says. "Everything is transparent . . . Whatever actions we take, they understand the need for such actions."
Back in 1970, the young engineer's quest to create durable Indian horns to rival those of the German company began on his return from the US with a master's degree in automotive technology. To raise capital, he opened a garage and began fixing cars, shocking many in a conservative Hindu society with traditionally strict divisions between education and manual labour.
"People thought: 'Why is this boy getting into a garage with oil, mud, muck, dirtying himself'," Mr Ramasamy recalls. "But I enjoyed it because it was my hobby. In our religion, it says 'work is worship'. So how can we think differently of different work?"
Initially the aspiring entrepreneur developed a radiator coolant recovery system and a brake system, but struggled with sales. "I had no financial strength for advertising," he says. The 1973 Opec oil embargo was also a blow to Indian car sales, which averaged 50,000 a year in the 1970s.
But after a decade of tinkering and materials research, Mr Ramasamy in 1982 unveiled a horn with a lifespan of 200,000 "cycles", nearly double the local standard. Roots started selling them as spare parts, but in 1986 started supplying Maruti-Suzuki, then a fledgling car venture.
By 1989 Roots was the largest hornmaker in India, then still a tiny market constrained by state production quotas. But growth ac-celerated after government reforms in 1991. "Business really began picking up," says Mr Ramasamy. He attended his first overseas trade fair in 1992 and started exporting to the Middle East and Europe two years later.
As he built the business, Mr Ramasamy wrote three times to Bosch to request a partnership. He had to be patient: it was only after two decades from his first contact that Bosch signed a long-term technical collaboration and buy-back agreement with Roots - a moment Mr Ramasamy recalls as "a great joy". To finance the deal, he sold a 25 per cent stake in Roots to Reliance Industries, although Reliance plays no active role.
Roots also pushed into the US market, setting up an engineering and marketing office in Cadillac, Michigan, to work with leading US carmakers, although it has now closed because of the downturn in the US market. By 2004, it supplied half the horns used by Ford Motor Co in North America from a $1m, purpose-built factory. But Roots ended the arrangement last March after Ford pressed Roots for lower prices. "Raw material prices were going up very much, but Ford wanted to reduce the price," Mr Ramasamy says.
Roots also built a factory in Malaysia, which opened in 2003, to supply south-east Asia, although promises of a south-east Asia free trade zone have not been realised.
With day-to-day management left to trusted professionals, Mr Ramasamy is still pursuing his quest for a lighter, more energy-efficient, longer-lasting horn.
"We are working on many other products," he says. "When the upturn comes, we will be ready."
The subtleties of worker relations in a new industrial era
Hundreds of thousands of Indians have lost their jobs to the global downturn or had a cut in pay. But in Roots Industries' base of Coimbatore - a hub of the engineering and textile industries - there has been little of the social unrest associated with job losses and wage cuts.
This reflects the weakness of India's labour unions, but Subir Gokarn, chief economist for Asia-Pacific for Standard & Poors, says it is also due to complex, generations-old ties between local entrepreneurs and industrial workers. "These are inherited relationships that have emerged out of a very established, elaborate social context, and have simply moved from the agrarian structure to the industrial structure," he says.
K. Ramasamy, founder of Roots, says that pay cuts are temporary emergency measures until business picks up. "[The workers] know if the money comes, we are giving it to them," he says.
In general, says Mr Gokarn, the workers understandthat the employer has no choice, and that "the more flexible they are, the better the chances that when the cycle turns, they can go back to old arrangements".
Copyright The Financial Times Limited 2009
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