Saturday, May 23, 2009

Apollo Tyres looks to be among world's top 10

S Kalyana Ramanathan / London May 22, 2009

Apollo Tyres, post its acquisition of Dutch tyre maker Vredestein Banden BV, is now keen to take its manufacturing footprint into the Asean (Association of South East Asian Nations) region.

After enjoying the status of a significant tyre maker in India for over 30 years, the company now wishes to move into the global league to be among the top 10 tyre makers in the world in the next five years.

The company’s 38-year old Vice-Chairman and Joint Managing Director Neeraj Kanwar (pictured) says that, given the intrinsic bulkiness of a product like automotive tyres, manufacturers like Apollo, who are keen on a global presence, will have to set up manufacturing bases in important markets.

Three years ago, Apollo made its first foreign acquisition by buying Dunlop’s South African operations. Last week, the company completed the acquisition of Vredestein Banden for an undisclosed sum. On a consolidated basis, the group’s turnover now stands at around $1.5-1.6 billion, making it the largest tyre company from India. The Dutch acquisition, with a top line contribution of nearly $425 million (Rs 2,000 crore), accounts for a fourth of this.

With its current operations in India, Africa and Western Europe, the group hopes to cross $2 billion (nearly Rs 10,000 crore) in turnover by March 2011, says Kanwar.

“It took us 30 years to cross the first billion-dollar mark in sales. The next should come in just about three years,” he adds. Now with Europe and Africa being part of its global presence, the next move will be either in China or relatively smaller Asean countries.

“Exports cannot be more than 30 per cent from any location. Without a strong domestic demand, we will not buy or set up greenfield projects anywhere,” says Kanwar. Within Asean itself, Thailand, Philippines and Indonesia count as prominent targets for the company, says an insider.

While the company continues to expand its global presence, its Indian operations are also fast reaching a critical stage. The new plant in Chennai, in which the company will be completing its first phase of expansion by November 2009 and second phase by September 2009, will have a capacity to make 100,000 truck and bus radial (TBR) tyres and 7.5 lakh passenger car radial (PCR) tyres a month, making this plant the company’s largest plant in the country.

In all, the company will be investing close to Rs 1,600 crore in this new plant. Three years after acquiring Dunlop South Africa, Apollo will make its first major expansion there with an investment of $40-50 million (around Rs 190-240 crore) over the next 16 to 18 months, which will double its capacity to make TBR to 1,400 tyres per day and a 25 per cent increase in PCR to 12,500 tyres a day.

Kanwar says that integrating the three operations (India, Africa and Western Europe) will be the next big challenge. Apart from accessto lucrative markets, technology, brands and R&D capabilities have been strong reasons for acquisitions outside India. The 90-member R&D team in Vredestein Banden can play a pivotal role for product development strategy for the entire Apollo group in the coming years. Members from the group in India will meet their new Dutch colleagues in the first week of June to discuss the road map for this integration work.

“Integration of technology, along with what to sell to which market and at what price will be discussed,” says Kanwar.

Even traditional critics of the tyre industry in India, like S P Singh, the convenor of the All-India Tyre Dealers’ Association, agree that the only way Indian tyre makers can access technology to make safety-regulated products is by acquiring companies outside India.

“This is the best way to access European markets, which have very stringent safety standards,” says Singh.

Despite its global plans, the most difficult challenge for the company today is, however, from its operation that is closest to home. The plant in Kalamassery in Kerala (Apollo has its registered office in Kerala), which makes technologically outdated cross-ply tyres, has reached a point where it cannot be expanded.

The company wishes to move this plant to Irapuram (also in Kerala) that is 40 kms from its Kalamassery plant. This move has been opposed by the union.

“At 80 tonnes a year output, the plant is not profitable on a standalone basis. Unless we can take that to 200 tonnes, it will not be profitable,” says Kanwar.

If and when the union agrees, it will be the next big expansion for Apollo Tyres in India after the new plant in Chennai goes into commercial production.

Friday, May 15, 2009

Corus management, Teesside plant union to form 'all-party' group

S Kalyana Ramanathan / London May 16, 2009
The management of Tata Group-owned European steel conglomerate Corus and the union at the Teesside plant (North East England) today met and decided to set up an “all-party group” to consider all options available to overcome the impending job loss at the plant.
The retrenchment was on account of the cancellation of a long-term order that should have ended in 2014. A member of the union who was at this meeting told Business Standard the talks were very fruitful and the all-party group will meet next week to take the discussion forward. This member said everything is being considered to avoid any job loss in this plant.
Earlier this month, a consortium of four buyers – Marcegaglia of Italy, Dongkuk of South Korea, the Swiss-headquartered Duferco and Alvory of Uruguay – had decided to stop buying steel from the Teesside plant due to a fall in the global price of steel.
The consortium had signed a deal with Corus in 2004 to buy up to 78 per cent of the plant’s output stretching into 2014. The loss of this contract forced Corus to announce earlier that it would be left with little choice but to temporarily shut down this plant.
It is believed that, though the number of direct workers at the beleaguered plant is 1,920, the total may rise to 10,000, taking into account other indirect support institutions attached to this plant.
The only silver lining to the challenge faced by Corus was the instant support it had received from the government, with both UK Prime Minister Gordon Brown and Business Secretary Peter Mandelson voicing their views and support to ensure there would no job loss in the plant.
Mandelson, soon after the news broke, urged the company to consider possible legal action to ensure the consortium honours the contract it had signed in 2004. The consortium apparently had saved several million pounds since 2004, as Corus was supplying its output at cost as agreed between the parties.
The Teesside plant, as of date, is operating even though its future is in doubt.

Saturday, May 9, 2009

India's High Commission in London becomes centre of Tamil protest

S Kalyana Ramanathan / London May 10, 2009

The Indian High Commission in London has become the target of protests and vandalism by those supporting the cause of the Sri Lankan Tamils. The protesters have, in the last 10 days, gathered twice outside the high commission.

On April 27, the British police took into custody five of the 1,000 protesters for damaging the building where the high commission is located. Again, on May 5, a group of 200 gathered outside the building, though it later dispersed peacefully. No member of the high commission was hurt in either of these incidents. After the April 27 incident, police presence had been beefed, said a spokesperson for the high commission.

A high commission official said there were no particular groups involved in these mass protests but sympathisers of the Sri Lankan Tamils, caught in the crossfire between the Sri Lankan army and the LTTE, have been appealing to the Indian government to help the Tamil civilians. “The Indian government has been sending doctors and providing medical assistance to people who have been affected by what is happening in Sri Lanka,” he said.

There are an estimated 200,000 to 300,000 Sri Lankan Tamils in the UK. On April 20, an estimated 3,500-4,000 supporters of the Sri Lankan Tamils had gathered at the Westminster Square and blocked traffic for a good part of the day. This protest, under the watch of a large number of Met police personnel, went off peacefully. Following this protest, British Prime Minister Gordon Brown had called Sri Lankan President Mahinda Rajapaksa to “emphasise the importance of a ceasefire”.

Little option but to close UK unit: Tata

S Kalyana Ramanathan & Ishita Ayan Dutt / London/kolkata May 10, 2009

Unacceptable, says British government; charges fly back and forth.

The British government today said it was “not prepared” to accept an announcement by Tata Steel and its European subsidiary, Corus, that there seemed no option but to indefinitely suspend operations at one of the latter’s factories in north-east England, which means loss of around 2,000 jobs.

This comes just four months after Tata-Corus’ announcement that it would have to cut 3,500 jobs at three steel units of Corus in Europe (two in the UK).

The threatened mothballing now is of Corus’ steel cast products unit at Teesside. Corus said yesterday that it was beginning talks with labour unions to discuss how to mitigate the impact of the threatened closure.

‘We are not prepared to reconcile ourselves to the inevitable closure of this plant,” said Peter Mandelson, the minister concerned in the British government. GMB, the union which represents many employed in both the threatened plant and among the firms of contractors who supply it, said it was urgently petitioning the government to intervene and save the jobs.

The closure, said Tata and Corus, was because of the cancellation of a 10-year agreement signed in 2004 between Corus and four steel producers, in which the latter had agreed to jointly buy 78 per cent of Teesside’s output . The four firms are Marcegaglia of Italy, Dongkuk of South Korea, the Swiss-headquartered Duferco, and Alvory of Uruguay.

The four firms said they had notified Corus of their termination of the 2004 agreement on April 7, citing market conditions in the industry. Last week, the World Steel Association said global demand would fall by 15 per cent in 2009, the steepest yearly decline since the second world war.

The four which withdrew, all steel slab makers, said the 2004 agreement had provided for such withdrawal in this sort of situation. They noted that Corus had tried to get a court stay on their move, but this was refused.

This was in reply to Corus and Tata saying the termination of the ‘Offtake Framework Agreement’ (OFA)was both unwarranted and probably a breach of contract.

An anxious Mandelson said it was “essential that Corus does everything it can legally, and with the government’s assistance, to reinstate the OFA. It is unacceptable that such a development should threaten jobs on such a scale, with such a potentially devastating impact on the area.”

His boss, Prime Minister Gordon Brown, gave Tata more cheer, saying the government would do “everything in our power to ensure the (terminated OFA) contract is upheld”.

Ironically, it was only this January that Corus had signed a formal “memorandum of understanding” to sell 80 per cent of its equity at Teesside to Marcegaglia and Dongkuk (56 per cent and 24 per cent, respectively), two of the four OFA terminators.. The said MOU was valid only till end-June and Corus said it assumed, though there was no formal word, that the proposed deal was also dead.

Tata has more problems ahead in its British operations. Jaguar Land Rover, its automobile subsidiary, is also in deep financial trouble and Rata Tata, the group chairman, has already publicly warned of significant job losses if he doesn’t get government help there. A deal with the British government to provide a guarantee for a proposed loan of 340 million pounds from the European Investment Bank to JLR is close to collapse, according to media reports.

Friday, May 8, 2009

Talks still on for securing JLR loan: UK

S Kalyana Ramanathan / London May 7, 2009

The United Kingdom’s Department of Business, Enterprise and Regulatory Reform (BERR) continues to insist that it is in talks with India’s Tata Motors’ owned Jaguar Land Rover (JLR) for guaranteeing the £340 million loan recently approved by Luxembourg-based European Investment Bank (EIB). “These negotiations are continuing,” BERR said in a statement. “Any government financial assistance must, of course, protect taxpayers' money. But on this basis we are prepared to help, although not on any terms,” it added.

The media in the UK, over the last fortnight, has been reporting that the talks between JLR and the UK government have been heading for a collapse over differences in the terms of the guarantee to be provided by the UK government.

The BBC said on its website said that financial support for Jaguar Land Rover from EIB was in jeopardy after a dispute over the terms of the loan. Quoting industry experts close to the talks, it said the carmaker would not accept the tough conditions imposed by the British government in return for guaranteeing the loan.