Cong uhappy with DMK ministers

The Congress, which intends to reshuffle the Union Cabinet with the 2014 Lok Sabha polls in mind, is deeply unhappy with the functioning of the DMK ministers at the Centre as it feels that the representatives of the Dravidian party are not even willing to learn the ropes of the trade let alone function.

The DMK currently has one Cabinet rank minister in M.K. Alagiri and four ministers of state (MoS), namely Palanimanickam, Jagathrakshakan, Gandhiselvan and D. Napoleon. Two other Cabinet rank ministers — A. Raja and Dayanidhi Maran — were forced to resign in the light of the 2G spectrum scam.
According to sources, the Congress feels chemicals and fertiliser minister M.K. Azhagiri is not capable of facing Parliament and, therefore, leaves it to his deputy Shrikant Jena to handle all issues related to the ministry in both the Houses. He doesn’t even venture to give his views even in Cabinet meetings chaired by Prime Minister Manmohan Singh, sources said.

Mr Napoleon, who is MoS in the ministry of social justice and empowerment, strangely, visits India only when Parliament is in session. Otherwise, he resides in the United States with his family, sources said. Minister of state for information and broadcasting Jagathrakshakan does not attend office regularly and ministers of state for finance and health — Palanimanickam and Gandhiselvan respectively — don’t come to Parliament regularly whenever it is in session, sources added.

The Congress, besieged by various scams, is desperately struggling to shed its image of a lackadaisical government and a dispensation that has sacrificed economic reforms at the altar of political expediency. In an attempt to wrest the initiative, the grand old party is looking for performance from its alliance partners as well. Also, from now onward, the Congress will have to contend with the absence of trouble-shooter and man for all seasons Pranab Mukherjee in the Cabinet. And with the general polls just 22 months away, the Congress leadership expects its alliance partners in the cabinet to pull up their socks for the greater good of the coalition, sources said.

Will Mukesh Ambani's billion-dollar bet on aerospace business work?

There is a talk in India's defence circles that whenReliance Industries Ltd (RIL) chairman Mukesh Ambanihired Vivek Lall from Boeing more than a year ago to launch RIL's aerospace and homeland security businesses, India's richest man had a dream: to build an entity like Boeing. 

There are others who say Ambani dreams not just big, but bigger — he wanted to build an aerospace company bigger than the world's best. 

Whatever the talk may be, the "quiet aggression" from India's largest private-sector company in forging ahead with its plans in aerospace business is remarkable, says a Mumbai-based consultant who has watched RIL for decades. "They are ready for the long-haul game," he says asking not to be named because he isn't authorised to speak to the media. 

ET reported on Saturday that RIL has sought an industrial licence to make aircraft parts and develop aerospace technologies. The company has filed an application with the department of industrial policy and promotion ( DIPP), under the ministry of commerce and industry. 

As the report says, the objective of the new entity, called Reliance Aerospace Technologies Pvt Ltd, is "to design, develop, manufacture, equipment and components, including airframe, engines, radars, avionics and accessories for military and civilian aircraft, helicopters, unmanned airborne vehicles and aerostats". 

The report quoted executives close to the matter as saying that RIL is expected to invest close to $1 billion in its aerospace business in the next few years. The Rs 44,000-crore conglomerate is also looking at hiring more than 1,500 people in the new business, the report said. 

Idea of a Hub 

Creating a manufacturing hub is at the heart of Mukesh Ambani's ambition in the aerospace business, says the Mumbai consultant. "He seems to be focusing on aircraft parts in the short term and on developing new technologies in the long term," this person said. He also felt RIL, now ranked No. 99 on the Global Fortune 500 Companies list, is likely to emerge as a "predominant player" in the aerospace and defence segments "to the extent that its other businesses might not be as important in a decade from now". 

RIL executives refuse to be drawn into making forecasts about the chunk of its revenues that would come from defence projects a decade or so later. However, they have long maintained that aerospace is a "significant segment" for the company — both in the aircraft parts and the aircraft building business. They have also said the highly networked and deep-pocketed company clearly has a natural edge in such cost-intensive segments

Tough Scenario 

Washington-based aerospace consultant Robert Metzger, who has written extensively about India's aerospace and defence markets, says it requires guts on the part of private players to enter India's aerospace business. "India should be encouraged that a company as powerful and accomplished as Reliance is prepared to enter the aerospace business. In my view, this shows vision on the part of that company's leadership and resolve to surmount many challenges," he says. 

He adds that continued preferences in favour of public-sector enterprises (such as defence public-sector units, ordinance factories, national laboratories, etc) deprives many private companies within India of the opportunity to enter aerospace markets with realistic chance of business success. "India's Defence Procurement Procedure contains no mechanism for the government to award design and development contracts to national private-sector companies," he says. 

He has a word for caution for RIL. For the company to succeed, it must also develop products outside areas of direct government authority. "Even Reliance will find that it is not good business to try to invent anew in India," he says. 

RIL seems to know the hazards of being in this new business. In aerospace, the company plans to make products for global players — essentially non-government customers — who find it tough to get high-quality products in the country. "The company is expected to be attractive for such players," says another Mumbai-based analyst who also spoke requesting anonymity. Many companies say they often face huge delays in receiving components. 

Monopoly Woes 

At least two aircraft majors that ET Magazine spoke to among companies that do business with state-owned Hindustan Aeronautics Ltd (HAL), India's largest aerospace company, say they are disappointed with the way things are. They complain of low-quality products and frequent delays. 

The spokespersons of these companies spoke on condition of anonymity. HAL denied the charges of inferior quality products. However, it confirmed in a statement that there have been delays in aerospace projects. "Even the best players in the world run behind schedule. Singling out HAL is therefore not fair," HAL said in response to a query by ET Magazine . 

Metzger puts it bluntly: "HAL's relationship with foreign suppliers may be less than ideal. I believe that HAL's 'monopoly' in aircraft and aviation systems is such that no major Indian industrial company sees an opportunity to compete directly. Yet, this is not a 'monopoly' earned by superior market performance so much as one that has been dictated by government policy." 

As luck would have it, the aircraft parts and maintenance, repair and overhaul (MRO) industries are growing slowly in India despite the huge growth in aerospace business. While all segments of the Indian aerospace industry grew substantially, the original equipment manufacturing posted maximum growth of 20% CAGR over the past five years. 

The MRO segment grew much slower, but is expected to grow faster and reach $1.8 billion by 2016. Analysts say the segment was hurt by a series of factors such as HAL's monopoly and the justifiable reluctance on the part of private players to take huge risks. 

Here is a tale that brings to the fore the sad state of affairs of the aircraft components segment in the country: An official at an MNC, again on condition of anonymity, told ET Magazine that some of the aircraft parts his company had received from an Indian vendor a few years ago could be traced to a bicycle shop in Bangalore. "The situation is that hopeless," he says. 

Adversity as Opportunity 

What is bad for the market is a good opportunity for companies that are ready to take the plunge. There are many other local players who have entered into pacts with foreign aircraft companies to pursue projects at home. But there is a difference between them and RIL, says the first Mumbai analyst. 

"Unlike other Indian aerospace players who have tied up with foreign companies ( see table: Key existing foreign-local aerospace & defence partnerships ) to compete for individual projects, RIL has a greater goal. It is not of landing projects but creating a manufacturing hub," he says. 

As with partnerships, RIL is looking at creating synergies to begin with, until it develops technologies — and aircraft — on its own. The company is in advanced talks with various global aircraft majors to enter into JVs and strategic collaborations, said executives close to the matter. It already has signed an MoU with Dassault Aviation to make major parts of Rafale in India. 

This deal was signed after the Centre announced Rafale as the winner in the $11-billion IAF deal for 126 medium multi-role combat aircraft. According to Dassault Aviation, which makes Rafale combat jets and Falcon business jets, the French company entered into an MoU with the RIL "for pursuing strategic opportunities of collaboration in the area of complex manufacturing and support in India". 

Other major companies RIL is in parleys with to enter tie-ups — across aerospace and homeland security businesses — include Raytheon, Airbus, Siemens,IBM, Cisco besides Northrop Grumman, said executives close to the matter, adding that the company is most likely to enter into a pact with an international aircraft maker to enter into a mega project to build aircraft and components.  A Delhi-based defence expert says RIL could tap into opportunities in the civil aviation manufacturing segment ahead of entering local military aviation in which HAL has a monopoly. RIL, executives close to the matter said, wants to engage in both: civil as well as military aviation. "But it will take a while...it is only a matter of time," the defence expert said.  According to market research firm Lucintel, the Indian aerospace industry, which has experienced significant growth in the past five years, is expected to reach $24 billion in the next eight years from the current size of less than $2.5 billion.  This is in line with the trends in Asia-Pacific: consulting firm Frost & Sullivan says India and China are among the preferred Asian countries for investments in aerospace business thanks to lower costs. By 2030, Asia-Pacific is expected to account for a 33% share of passenger traffic, followed by Europe at 23% and North America at 20%.  RIL is looking at entering into tie-ups with companies such as Airbus and Honeywell besides Boeing in the offsets business. Thanks to India's defence offset policy —which requires foreign aerospace sellers who get local orders worth Rs 300 crore or more to invest at least 30% of the contract value into local research and development or production— overseas players have entered into joint ventures or strategic partnerships with local players.  Meanwhile, according to documents reviewed by ET Magazine , the Naresh Chandra Task Force on national security has recommended that the benefits of offsets should be primarily directed towards increasing domestic designing, manufacturing and technology acquisition.  "The Indian offsets partners should be able to develop capabilities to become part of the global value chain. Institutional mechanisms for coordination between civil aerospace and defence aerospace need to be urgently reviewed," it suggests.  On The Tarmac  RIL also looking at tapping its inherent advantages of a large number of highly qualified engineers and scientists to create an R&D base. "They (RIL) have already made the right moves in the right direction by investing in sectors such as aerospace and homeland security and in the right people," says Rahul Gangal, director of defence advisory and investments at consultancy Aviotech.  Of course, Lall's appointment as CEO and president of the aerospace and home land security businesses was a good decision, says another New Delhi-based defence consultant. "The credit goes to Mukesh Ambani for picking the right people, especially Lall who [having worked previously with Raytheon and Boeing besides Nasa] enjoys a great reputation among overseas companies looking to tie up with Indian companies," he says. This consultant didn't wish to be identified.  Clearly, in aerospace, things are looking much more favourable than ever for private players like RIL, but a few analysts are skeptical. For RIL to be able to do more than what the existing private-sector players are doing in the sector, it has to stretch a bit more than it can, says the Mumbai analyst quoted earlier in this story.  "Key challenges [for new players in aerospace] may include management of pre-operative investments made in an environment where threats of programme slippages and cancellations are real and unquantifiable," notes Gangal. "Given those risks, maybe Reliance alone can tide over odds," the analyst says.  A Very High-stakes Game Reliance Industries Ltd recently created two new entities: Reliance Aerospace Technologies Pvt Ltd and Reliance Security Solutions Ltd. The creation of these businesses were set in motion more than a year ago when RIL created an entity called "new business" and hired the then Boeing India chief Vivek Lall for launching its aerospace and homeland security divisions. With Lall at the helm, RIL wants to make aircraft of its own.  $500 mn to $1 bn: Size of initial investment by Reliance Industries in its aerospace business  1,500 plus: Employees it plans to hire for its new aerospace venture  Grand Foray --> Recently RIL applied to the department of industrial policy and promotion (DIPP) for an industrial licence for its aerospace arm  --> It applied for licence to design, develop, manufacture, equipment and components, including airframe, engine, radar, avionics and accessories for military and civilian aircraft, helicopters, unmanned airborne vehicles and aerostats  --> It also seeks to conduct research, design, development, and production of new aerospace technologies,  testing and certification of such technologies, materials, components and equipment

RIL's Infotel may buy $1 billion 4G network gear from Samsung Electronics

Reliance Industries-owned Infotel Broadband is likely to procure over $1 billion (about 5,500 crore) of network gear from Samsung Electronics to meet a sizeable chunk of its fourth generation equipment requirement.

Executives familiar with the matter told ET that talks are at an advanced stage for supply of LTE, or long-term evolution technology, network gear to launch the first wave of Infotel's 4G services in Mumbai and Delhi. The two companies have also discussed potential bundling of a 4G handset and devices supply deal within the contract, the executives said.

The entry of the South Korean conglomerate in India's telecom infrastructure market is expected to intensify competition in a sector where most operators have lowered capital expenditures, entailing fewer contracts for equipment providers and more pressure on their profit margins.

While Samsung said it would not comment on speculation, Infotel Broadband declined to comment on the specifics of the deal.

"Infotel Broadband Services has, and continues to be, engaged in discussions with numerous potential partners where a partnered approach creates win-win-win opportunities for IBSL, its customers and its partners. Given the strategic and confidential nature of the ongoing discussions, we are unable to confirm or comment on any specific discussion," said a Reliance Industries spokesman, in a written response to ET's email query.

Infotel has asked Samsung to supply, for its ongoing equipment trials, about 3,000 base stations, which may be eventually deployed in Mumbai, an executive said.



Infotel is likely to initially source a mix of Samsung's SmartMBS multi-standard base stations and small-cell LTE base stations, the executive said, adding that the 4G base stations are likely to be priced between $15,000 (about 8 lakh) and $20,000 (about 11 lakh) a piece.

"Reliance is in talks with reputed 4G gear vendors, including Samsung, and will shortly finalise a clutch of equipment contracts that will collectively run into billions of dollars," said an executive, who did not wish to be named.

Besides Samsung, Reliance is believed to be in talks with China's Huawei and ZTE, along with European players such as Ericsson and Nokia Siemens Networks that have more experience in managing the networks of mobile carriers in India.

Infotel is likely to take a final call depending on the ability of the vendors to adhere to the stringent 4G network rollout timelines in addition to offering competitive rates.

"Timelines for the subsequent countrywide 4G push will be fixed after we have tested the waters in Mumbai and Delhi," an executive said.Industry experts say Reliance has an edge over its rivals because it is the only player with pan-India 4G permit, even as the country's leading mobile carrier, Bharti Airtel, had a headstart after it launched 4G services in Kolkata and Bangalore.

Maruti may start Gujarat plant work in three months

The country's largest car manufacturer Maruti Suzuki is expected to begin construction of its proposed manufacturing unit in Mandal taluka near Ahmedabad within the next three months, a top Gujarat official said. 

TOI was the first to report about the company's plan to set up another manufacturing facility in Gujarat in October last year. 

Gujarat chief minister Narendra Modi recently met Suzuki Motor Corp chairman & CEO Osamu Suzuki during his Japan tour. "Chairman of Suzuki has said they will start the work on setting up car manufacturing plant at Mandal soon," the state's principal secretary (industries) Maheshwar Sahu said. "I think they would begin construction work within next three months," said Sahu. 

The company had faced a serious bout of violence at its Haryana plant recently and there was speculation that it might focus more on the proposed plant in Gujarat. "They (the Japanese) are very serious about making investments in Gujarat in sectors like automobile industry. An exclusive vendor park for Japanese industrial houses is also proposed near Mandal," Sahu said.

From Min Chueh Chang to Jeremy Lin, China lives the American dream

In one of the most high-profile sports signings of the year, NBA's Houston Rockets last week signedChinese American basketball star Jeremy Lin for $25 million over four years. Part of the reason the Rockets signed Lin, who has starred in only a handful of NBA games until now, was his marketing potential, especially among the Chinese Americans in the Houston area. 

Since his departure, the Forbes magazine reported that the share value of Madison Square Garden, the home games venue of Lin's former team New York Knicks, plummeted by more than $93 million. 

Lin's meteoric rise earlier this year as the first big league star athlete from the Chinese American community — the largest Asian American group — had become a global media story. Yet, the Harvard graduate is not the first bona fide celebrity from the community. 

1854 & Beyond 

The 3.8-million strong Chinese American community has a host of international modern icons like film starBruce Lee, director Ang Lee, cellist Yo Yo Ma, the co-founder of Yahoo!, Jerry Yang, and fashion designer Vera Wang, among many super achievers in different walks of life, to idolise as their own here, but Chinese Americans still revere Yung Wing, the first Chinese student to graduate from a US university, from Yale College in 1854. 



Wing, who favoured reform in China, went back after his stint at Yale, but eventually with the Chinese government's approval, paved the way for a group of 120 Chinese students to immigrate to the US. Many of those students in turn went back to their home country, and were later credited with helping shape China's civil services and build new engineering projects that were a precursor to modern China's infrastructure boom. 

In our times, in the age where "brain circulation" — a term devised by AnnaLee Saxenian, professor and Dean of the UC Berkeley School of Information, who propounds the theory of immigrant entrepreneurs taking their ideas back to the country of their origin in increasing numbers — or "reverse brain drain", as propagated by the likes of technology entrepreneur Vivek Wadhwa, the life of Wing offered an early insight into immigrant behaviour, the deviation to better opportunities, wherever in the globe it may be. 

It's a different matter that in time, Wing returned to the US to become a naturalised citizen. Fifty years later, he was shorn of that right by the US government and barred from entering the country after his reformist views were frowned upon in China and there was a price of $70,000 on his head. He eventually fled Shanghai, and managed to sneak back into the US to see his son graduate from his alma mater, and died in Connecticut. 


For the Chinese Americans, there are no dearth of luminaries and stars to take up as role models, in just about any field one can think of, but the vision and struggle of Wing and the life of the original "Siamese Twins" Chang and Eng Bunker, the conjoined twins of Chinese origin, who were born in what is now known as Thailand, but became entrepreneurs and naturalised citizens in the US in the 19th century, raising almost two dozen children between them on their plantation in North Carolina, have ensured them a long history to look back on in developing as one of the most powerful overseas diasporas in the world. 

Sweet Sixties 

For the Indians, who have a history of entering the US as slaves and labourers in the 19th century, the immigration floodgates opened up in the 1960s, when skilled professionals were allowed to emigrate. The Chinese, though they also came to the US as labourers in the 19th century in large numbers, faced horrendous immigration regulations, including the infamous Chinese Exclusion Act of 1882, which outlawed all Chinese immigration to the US and denied citizenship to those already settled in the country. US President Grover Cleveland, who supported the Act, in 1888 proclaimed the Chinese community as "an element ignorant of our constitution and laws, impossible of assimilation with our people and dangerous to our peace and welfare". 

It was only after the US and China became allies in World War II that the US welcomed Chinese immigrants and eased restrictions. They started to flourish here, matched perhaps only by the Indian American community in terms of overall achievements and accomplishments, and not to forget in the land of capitalism, accumulation of wealth. 

Elaine Chao, who served as the secretary of labour in the cabinet of President George W Bush from 2001 to 2009, the first Chinese American to be appointed to a cabinet position, and who is married to Mitch McConnell, the current senate minority leader, laid bare the ridiculousness of Cleveland's words. 

The Chinese community, though have been undoubtedly late in taking to politics here — take for example Dilip Singh Saund, the first Indian American to serve the US House of Representatives from California, in 1957, and compare it to the first Chinese American to be a political heavyweight in that state: March Fong Eu, who became California's secretary of state, in 1975. She also served as US ambassador to the Federated States of Micronesia, from 1994-96. 

Political Edge 

But in the past decade, the Chinese have showed a sudden panache for politics and governance, and there are a growing number of Chinese Americans clamouring for national attention in politics. In California itself, where no other Indian American has managed to come close to emulating the feat of Saund, the Chinese have made steady progress. Wilma Chan became the first Asian American California state assembly majority leader, in 2002, and in 2009, Judy Chu became the first Chinese American to be elected to the US House of Representatives, from the high-profile Los Angeles County. 

And emulating the feat of Chao is Steven Chu, the current United States secretary of energy, and a Nobel Laureate to boot; the winner of the 1997 Nobel Prize in Physics for research in laser cooling. Gary Locke, the former secretary of commerce and the first Asian governor of any state in the US, becoming governor of the state of Washington, in 1997, is currently the American ambassador to China, a man who is now famous around the world as the humbler ambassador who relishes lugging his own baggage around airports. 

But the number of Chinese in politics pales when it comes to their achievements in the arena of business, where like the Indian Americans they have carved an indelible mark in the US and the rest of the world. 


Interestingly, if one were to try do an analysis of how many CEOs each community has, the Indian Americans will seemingly come off better, with some of them currently heading some of the Fortune 500 companies, but the Chinese Americans have a long history of being the pioneers of the Internet business, and the leaders of technology in some of the biggest breakthroughs of the past 50 years. 

Valley Voices 

Apart from Jerry Yang, some of the top corporate honchos include, John Chen, the CEO of Sybase, Steve Chen, the co-founder of YouTube, Andrew Cheng, co-founder of Panda Express, Weili Dai, co-founder of Marvell Technology Group, Ming Hsieh, co-founder and CEO of Cogent Systems, Kai Huang, co-founder of Guitar Hero franchise, Andrea Jung, CEO of Avon, Norman Liu, the CEO of GECAS, and Charles Wang, founder, CEO and chairman of Computer Associates, apart from Wendi Deng, the wife of Rupert Murdoch. 

And tech and innovation wizards like Feng-hsiung Hsu,IBM developer of Deep Blue, which beat World Chess champion Garry Kasparov in 1997; Min Chueh Chang, co-inventor of the first birth control pill; and Yuan-Cheng Fung, founder of Modern Biomechanics, will find a place in history for posterity. 

But some of the richest Chinese are also those who studied in the US and then went back home to start their own businesses, like the MIT-educated Charles Zhang, who is the founder, chairman and current CEO of Sohu.com Inc. He is regarded as one of China's Internet pioneers and was named by Forbes magazine as one of the richest men in China in 2003. 

Charles Chao, the chief executive officer and president of Sina.com, received his master of professional accounting from University of Texas in Austin, and also holds an MA degree in journalism from University of Oklahoma. The giant search engine, Baidu.com, established in 2000, was the brainchild of Robin Li and Eric Xu, who both did stints overseas. 

Chinese nationals, like their Indian counterparts, have a tough choice in an increasingly globalised world when it comes to choosing whether to continue to live and work in the US after they get their graduate degrees here, or to try their luck back home in a business environment where the opportunities are limitless and creativity will yield instant rewards and fame. 

And more often than not, their decisions are being shaped by the years of waiting for permanent residency, points out Rong Xiaoqing, a senior reporter for the Sing Tao Daily, a Chinese community newspaper, based in New York city.
When asked if she thinks the Chinese Americans have accomplished more than the Indian American community, Xiaoqing says: "One has to look at the strengths and weaknesses of each country. In the US, the visa issue is limiting people's opportunities, not giving them a chance to fulfil their potential. Also, times have changed. There are now more opportunities in China back home. A lot of Chinese individuals have been moving back steadily since the mid-nineties." 


Unlike the Indian American community, whose quest for a gold medal in the Olympics and an Oscar in the mainstream section finally got quenched recently after decades of waiting, for the Chinese, the fountain of talent and international recognition keeps flowing unabated in the field of entertainment and sports, and is a source of pride for each one of them living here. 

One of the best known Chinese names in Hollywood is not that of Ang Lee, the Oscar winning director of Brokeback Mountain, but a cinematographer by the name of James Wong Howe, who was nominated for 10 Academy Awards for cinematography, and won twice, in 1955 for The Rose Tattoo, and in 1963 for Hud. He was a pioneer of deep-focus cinematography, photography in which both foreground and distant planes remain in focus, and was recognised as one of the 10 top cinematographers ever. Haing Ngor, a Chinese Cambodian actor won an Oscar for best supporting actor in The Killing Fields, marking a landmark day for the community. 

And if there is one arena where even the Chinese fear the Chinese Americans it's in sports: the training regimen might not be so rigorous outside the borders of China, but the impressive results the athletes of Chinese origin have brought to the US, have helped them and the community acclimatise and be accepted here faster than anything else combined. 

Michael Chang broke a glass ceiling when he became the youngest male tennis player to win a Grand Slam tournament, the French Open in 1989, at the age of 17. And while Jeremy Lin, the first Chinese American to play in the NBA and star of the New York Knicks may be the player of the year, one can never forget the winsome smile and grace of Michelle Kwan, arguably the greatest female skater of all time. A twice Olympic medalist, in 1998 and 2002, she is a five-time World champion and nine-time US champion, the all-time record which is yet to be bested. 

Maruti's Manesar plant unrest: Possible impact on rivals, contract labour, Gujarat & industrial relations

The labour unrest at Maruti Suzuki's Manesar plant will have significant financial implications for the company. But the unrest will also have its ripple effect within and outside the automobile industry. Perhaps the biggest is an overhang of fear and anger among the HR fraternity.

"This is the third lynching of an HR executive by angry workers. We are the sacrificial lamb. We are only the messengers — getting badgered from both the sides," says a Mumbai-based HR head of a large automobile company. Soul-searching among HR executives has begun. But the Maruti labour unrest will have other ramifications. ET Magazine analyses five areas where the unrest is likely to have an impact: 

Small Gains for Rivals 

Despite intense competition, Maruti has so far managed to protect its turf well. The dent in sales will be marginal and temporary 

The labour unrest at Maruti's Manesar plant is tragic and automakers across the board and the industry body SIAM have condemned it and expressed solidarity with the company. But competitors will think like competitors.

Almost all car companies competing in the segment — from Hyundai to Ford to Skoda — are gearing up to make the most of the lockout at the Maruti plant. 

Maruti's two most popular models — Swift and Dzire — are manufactured only at the Manesar plant. Despite intense competition, these models have a waiting period. While the backlog for Swift is 55,000 units, for Dzire it is 65,000 units — which means a waiting period of close to five months.

The demand rush is mostly for the diesel variants. "If any, the impact on sales of these two models will be very marginal," says Deepesh Rathore, managing director, IHS Automotive India, an information services company. 

IHS Automotive has built forecasts around two scenarios. In the first case, it expects the plant to be shut for three weeks followed by three weeks when the plant would run at 50% capacity.

In this scenario, it expects the production loss to be 45,000 units of which competition may take away just 18,000-20,000 as many customers might be willing to wait. In the second scenario, it sees the plant being shut for five weeks followed by three weeks of 50% capacity run before returning to normalcy. 

In this scenario, the production loss would be around 65,000 units and 26,000-30,000 would-be customers might opt for another brand. What plant shutdown will do is increase the already long waiting period. However, the Dzire and Swift buyers are likely to behave differently. Dzire is a popular model among cab operators who will find it difficult to handle a long waiting period, says a senior executive working from a rival carmaker. 

Hence, lot more Dzire buyers will opt for non-Maruti models and diesel variants of Toyota Etios and M&M's Verito will be the likely gainer. In the Swift segment, customers — driven less by commercial considerations — wouldn't mind waiting for an extra month to buy their preferred model and hence the switch to another model will be lot less. Among the models that might benefit are the slightly pricier Hyundai i20 (not i10 because it does not have a diesel variant), Ford Figo and Toyota Liva. 

Expectedly, Hyundai — Maruti's closest rival — has already swung into action. Last week, it shot off letters to its dealers to push sales of i20 and the sedan Verna. Tele-calls and SMSes are being used to push sales. And they are also offering higher incentives to agents selling the available trims in both i20 and Verna. Ford has begun offering a Rs 3,000 discount on Figo, Swift's nearest rival. 

Toyota is offering free accessories worth Rs 10,000 on diesel variants of Liva and Etios But almost everybody expects this dent in sales to be both marginal and temporary. 
"Nobody is able to compete on Maruti's cost," says VG Ramkrishnan, senior director, Frost & Sullivan, a consultant. In the past five years, six-seven new auto companies have entered Maruti's bastion. "But there is not a single company, besides Hyundai, that has been able to successfully challenge Maruti in that segment," he adds. 

Contract Labour Loses Some Shine 

More than 50% of the workers in shop floors today are cheaper contract labour. Unrest has forced Maruti to rethink. Will others follow? 

It first began with India's stifling labour laws. India's manufacturing sector, going through the restructuring pain in the 1990s and figuring that the labour law reforms will remain elusive, opted for temping and contract labour. In the process, they also discovered that they could play the labour arbitrage game. 

Contract workers today work out to be almost 40% cheaper than regular ones, estimates the Mumbai-based HR head of a leading auto company. Thanks to the flexibility and cost efficiency it offered, use of contract labour in the manufacturing sector today is very high. In the automobile sector alone, it is estimated that nearly 50% of plant workers would be contractual. 

The Manesar imbroglio has now forced them to pause and think. Maruti, estimated to have 50-55% of workforce on contract, has already announced that it will overhaul its recruitment policy. "We will not have any contract worker in the core areas of manufacturing after March 2013. We have decided to change the mode of employment and all future recruitment would be done through the HR department to remove distortions," Maruti chairman RC Bhargava told the media last week. The carmaker's move is being watched by many in the auto industry in specific and the manufacturing world at large. 

"It is still early to assess if this will have a broader impact. But we are keeping a close watch," says a senior Mumbai-based executive of an auto company. In a competitive scenario, cost and flexibility pressures far outweigh most other issues, he says. 

And as Maruti unrest dies down, many say, it is very likely that the risks of using high percentage of contract workers may again be totally relegated to the background. "But even if they don't act, the Maruti unrest has made them more conscious of the risks involved," the executive said. 

Bigger Lure for Gujarat Auto Hub 

Stable political climate, pro-business government & good infrastructure is luring auto firms to Gujarat. NCR auto hub is losing out 

NCR as an auto hub has been on the decline for some time now. Landlocked, NCR owed its status to historical and political considerations. The setting up of Maruti Suzuki was a political move. Today it has other manufacturers like Hero Honda, HMSI and Honda-Siel.





Barring HMSI's Rs 860-crore, 1.2-million unit plant in Rajasthan near NCR, no major investments have come to the region in the recent past.

There were two reasons why NCR got some of these investments. One, companies like Maruti, which already had a big presence and built their vendor eco-system here, obviously preferred to make fresh investments in the region. Two, many MNCs, especially the Japanese with large expat population, have traditionally preferred to locate in the friendlier and more hospitable NCR. 

But over the past decade, things have changed. Almost all new investments — from Nissan to Renault to Ford — have totally ignored NCR while choosing their plant location. NCR's landlocked status, clogged infrastructure, lack of easy access to ports — especially when exports from India are becoming a critical part of the manufacturing strategy — have led to NCR's decline. Not to forget that most original equipment manufacturers try to diversify their geographical risk (especially when production is around the 1-million mark). 

The unrest at Manesar may be the final nail in the coffin as far as the NCR auto hub is concerned, says Mohit Arora, executive director, JD Power (Asia Pacific), a research firm. Gujarat will be the biggest gainer. With access to good ports, the Narendra Modi government in the state offers a stable political regime, conducive and efficient business environment for India Inc. 

Not to mention the significant upsides that the Delhi-Mumbai Industrial Corridor offers for the state. With the Modi government going on an overdrive to woo investments, expect Gujarat to get a lot of attention from global automakers. By 2015-16, it is estimated that nearly one of every three cars that roll out in the country would be from Gujarat. 

Soul-searching on IR 

Industrial relations was the non-sexy part of HR that was ignored as top talent flocked to the glamourous services sector. Campuses and India Inc are now waking up 

If there is a message that the Manesar unrest sent out it is that the industrial relations (IR) department matters and is an extremely critical area for a company. One of the biggest failures in the Maruti dispute was the company's inability to manage industrial relations. 



The past two decades of India's growth has been on the back of the rise of services sector. In the process, the grimy world of manufacturing and shop floors were ignored. Top engineers and MBAs preferred to work for services sector companies rather than a manufacturing firm. This did have a fall out in the HR space.

"Industrial relations is not sexy enough. B-schools don't focus on it. It is not a sought after course on the campuses," says K Ramkumar, executive director, ICICI Bank. So while on one hand top talent fled from the IR to HR, manufacturing firms — grappling with business challenges on multiple fronts — did not give it the priority or the attention it deserved. Senior corporate executives admit that the gap between the shop floor and the boardroom has never been wider. Hopefully, the Manesar unrest might lead to some rethink. 


"The next 3-5 years will be a period where companies and HR professionals will need to relearn the people-management game," Ramkumar says. Some changes may have already begun. Last year, soon after Maruti's labour unrest, students at XLRI Jamshedpur organised a seminar on IR. "I was surprised that students took that initiative," says Pranabesh Ray, dean, XLRI.

Very few of their students opt for specialisation in IR. More surprising was the fact that companies, unions and the government actively participated in it and it was well attended by students from XLRI and other institutes. 

"I think we need to broaden the meaning of IR and also include services sector," says Ray. IR should not be just about managing shop-floor workers but managing any collective of employees. "As economy slows down, it will create fewer jobs. Discontent will be high. Companies across the board will have to learn to manage people and their expectations afresh," he says. 

A Small Push for Local Voice 

MNCs have learnt the hard way to become sensitive to Indian consumers. Will they extend this sensitivity to the shopfloor as well? 

It's a question that many are asking. Did Maruti, the company that understands India and Indian customers so well, somewhere lose touch with its own employees, and why? As India's economic traction increases, more and more MNCs are sending their senior executives to head India operations. 

From Hyundai to Ford, Honda to Fiat and Audi to BMW — almost all car manufacturers are headed by expats. Some Korean firms like LG and Hyundai are seeing a bigger Koreanisation of their top management. It is also a fact that the expat voice often tends to dominate crucial decisions in the company. Expats are at times constrained in their understanding of Indian consumers. It applies to Indian workers too. 

The unrest at Maruti will hopefully nudge them to pause and rethink. They need to bring in sensitivity to supposedly "non-bottomline" issues like IR and factory management. And that can only be good for the management and labour. 

Apple, Twitter not in discussions for stake

Apple Inc and Twitter are currently not in discussions on the mobile technology giant taking a stake in the popular social networking site, sources familiar with the matter said. 

Apple in recent months has held negotiations with Twitter to explore investing hundreds of millions of dollars in the company, The New York Times reported on Friday, citing people briefed on the matter. The Wall Street Journal said such discussion were held over a year ago, citing a person familiar with the matter. 

It is unclear if the two companies talked about a deal in the past and at what level such discussions were held, but there are no current, formal talks between the companies on an investment or acquisition, the sources said. 

Both Apple and Twitter declined to comment. The iPhone and iPad maker typically does not take equity stakes in companies and prefers to acquire technologies by buying up smaller startups that are lesser known. Twitter executives have said repeatedly they are in no rush to seek additional financing, either privately or on public markets, since they have "truckloads" of cash. 

Apple has never delved deeply into the social media space dominated by Facebook Inc, but it has dabbled in trying to make music more social by launching a social network on iTunes called Ping, which has not caught on. 

Twitter, the Internet phenomenon with some 140 million users that allows people to "tweet" 140-character messages, is already well integrated into Apple smartphones and tablets. Apple customers can directly share their comments on Twitter when on their iPhones, iPads or Mac line of computers. 

Twitter, the San Francisco-based startup that is viewed as the most significant candidate for the public markets following Facebook, is ramping up its efforts to generate revenue from the 400 million tweets that cross its networks daily.

Godrej sees slowdown in rural FMCG sales in short-term

With more and more consumer goods companies rushing to tap the rural markets, Adi Godrej-led Godrej Consumer Products (GCPL) has warned that rising cost of living may lead to a decline in rural sales in the short-term. 

"The rise in overall cost of living and concerns over decrease in social spending may have some impact on growth in rural FMCG sales in the short-run, but over the medium-to-long term, wage increases and enhanced exposure to products will lead to sustained demand," Godrej Consumer Products Limited (GCPL) Chairman Adi Godrej said in the company's annual report. 

Companies that are innovative, agile and responsive to the needs of consumers will stand out, he said. 

The consumer goods sector has benefited in the past few years from a rise in disposable income in rural areas, where nearly 70 percent of the country resides, he said. 

FMCG companies net nearly half their sales from rural markets now and continue to pursue expansion in rural areas. The budget proposal to increase the allocation to the Bharat Nirman programme, from Rs 10,000 crore to Rs 58,000 crore can further drive rural growth and boost sales, he noted. 

"The government programmes like the National Rural Employment Guarantee Scheme and minimum support prices for farm produce have been increasing rural incomes and standards of living of these masses. This has also led to increasing awareness and exposure to consumer products and brand preferences, in line with urban consumers," he observed. 

Sounding bullish on the prospects of the sector during this fiscal after it being plagued by inflation and high interest rates during the previous year, he said, "Despite high interest rates, inflation and political uncertainties, the FMCG market continued to grow at a healthy rate last fiscal. Consumer demand remains strong and we are hopeful of that continuing." 

"The FMCG sector continues to offer considerable opportunity for growth, given the increasing rural penetration and development in tier II and III cities...," the GCPL chairman said, adding the sector is expected to maintain robust growth rate. 

The FMCG sector is the fourth fastest growing segment in the country with a CAGR of 11 percent over the last decade led by strong domestic consumption. 

Godrej, who is also the president of Confederation of Indian Industries, said the economic environment over the past year has been challenging. 

"The reform programme has slowed down and governance issues have not been tackled as rapidly as they should be, but the opportunity is tremendous. Restoring growth through reforms and good governance is going to be very important and should be the main objective of the government. 

"We expect the economy to get a push on the back of reforms such as the goods and services tax, direct tax code and opening up of FDI in key sectors. Progress on reforms will create a virtuous cycle of boosting production, consumption, attracting more investments and reviving growth," Godrej said.