CHAPTER -1

INTRODUCTION

INTRODUCTION ABOUT INTERNSHIP

An organisation is a social arrangement which produces collective goals, which controls its
own performance, and which has a boundary separating it from its environment. Organisation
is the association formed by a group of people who see that there are benefits available from
working together towards a common goal.

Organisation studies are the study of individual and group dynamics in an organisational
setting, as well as the nature of the organisation themselves. Whenever people interact in an
organisation many factors come into play. Organisation study programme attempts to
understand and model these factors. Organisational study is essential to any MBA graduate as
it helps them to connect theory with practice in the initial learning phase.

Organisation study refers to the study of organisation as a whole and getting adequate knowledge
with various departments in the organisation. The study was carried out at Nahars Engineering India
Pvt. Ltd. Narsapura Industrial area, Karnataka, India.
INDUSTRY PROFILE

Auto Parts & Equipment Manufacturing Industry

The US fitness equipment manufacturing industry consists of about 100 companies with
combined annual revenue of about $3 billion. Major companies include Cybex International,
ICON Health & Fitness, Life Fitness, Nautilus, and Precor. The industry is concentrated : the top
five companies account for more than 50 percent of revenue.

The automobile and automotive parts & components manufacturers constitute a major chunk of
automotive industry throughout the world. The automotive manufacturing sector consists of
automobile and light truck manufacturers, motor vehicle body manufacturers, and motor vehicle
parts and supplies manufacturers. This sector is engaged in manufacturing of automotives and
light duty motor vehicles, motor vehicle bodies, chassis, cabs, trucks, automobile and
utilitytrailers, buses, military vehicles, and motor vehicle gasoline engines.

In order to appreciate the current approaches and demands by Automobile Industry, we take a
look at history of global automobile industry.

The first automobile company was founded in 1896 by Charles Edgar Duryea and his brother
Frank and this initiative paved the way for the emergence of an automobile industry.

The automobiles manufactured in the 1890s were called as 'horseless carriages'. This marked the
beginning of craft production as all the manufacturing was done by craftsmen employed in metal
and machine tool industries. Each car was tailormade to suit the needs of wealthy customers. But
this craft-based production structure demanded skilled workers and resulted in very low
production volume.

By early 20th Century, the craft-based system was replaced by mass production techniques,
popularized by Henry Ford. In 1913-14, he upgraded the existing push and move assembly line
to a conveyor belt line, which reduced assembly time considerably. His famous Model T was
assembled in 93 minutes. The main advantage of mass-production technique over craft-
production was the ability to manufacture several products simultaneously rather than one at a
time. The other features like inter-changeability of standard parts, standardized product design,
and centralized hierarchy of tasks helped to realize economies of scale. This increased labor
productivity by leaps and bounds but also brought about a reduction of skilled labors. Each
worker performed identical tasks using identical tools which were always kept within hand-
reach. It was found that the Ford assembler's average task cycle declined from 514 minutes in
1908 to 1.19 minutes with the introduction of moving assembly line in 1913 (Gopal, 2009).

The enormous success of mass production resulted in the global sector being dominated by the
American car manufacturers. In 1955, North America accounted for 75% of global motor vehicle
production. The Big Three, Ford, GM and Chrysler accounted for 95% of all American car sales.

In Europe, mass production was widely adopted in the 1950s through the initiatives of
Volkswagen, Renault and Fiat. With focus on product strategy, the European automobile
industry contributed more than the US to the global automobile production during 1960s and
early 1970s.

GLOBAL AUTO COMPONENT INDUSTRY-CURRENT STATUS

Brazil, Russia, India and China have been recognized as Low Cost Countries or Leading
Competitive Countries (LCCs) for Auto Component Exports.

Kenneth Lieberthal and Geoffrey Lieberthal (2017) have some findings about low cost
manufacturing in China. They note that China is attracting enormous attention for very good
reason. The reason is not just that China is big or that its economy is the only one that has been
able to sustain rapid growth over the last there years. It is that China is now profoundly affecting
the competitive capabilities of all multinational corporations.

Companies throughout the world are affected by the impact of low cost Chinese manufacturing
on worldwide pricing, for instance, whether or not they have operations there or engage in direct
trade.

For Tarun Khanna, et al. (2016), multinationals face different kinds of competition in each of
emerging markets in four countries -Brazil, Russia, India and China.
MAJOR INDUSTRY PLAYERS:

The worldwide automobile industry is largely dominated by five leading automobile

manufacturing corporations namely Toyota, General Motors, Ford Motor Company, Volkswagen
AG, and Daimler Chrysler. These corporations have their presence in almost every country and
they continue to invest into production facilities in emerging markets namely Latin America,
Middle East, Eastern Europe, China, Malaysia, India and other markets in Southeast Asia with
the main aim of reducing their production costs.

NATURE OF THE INDUSTRY

Despite news of plant closures and unemployed auto workers, the motor vehicle and parts
manufacturing industry continues to be one of the largest employers in the country and a major
contributor to our economy. Motor vehicle and parts manufacturing is constantly evolving to
improve efficiency and provide products that consumers want in a highly competitive market,
which at times may mean outdated plants are forced to close. It also means companies and
workers must adapt more quickly to changes in demand and production practices so that new
technologies can be implemented and work can be done on a number of different vehicles at one
time. Teamwork and continual retraining are key components to the success of this industry and
the ability of the workforce to adapt.

Motor vehicle and parts manufacturers also have a major influence on other industries in the
economy as well. Building motor vehicles requires vast quantities of materials from, and creates
many jobs in, industries that manufacture steel, rubber, plastics, glass, and other basic materials.
It also spurs employment for automobile and other motor vehicle dealers; automotive repair and
maintenance shops; gasoline stations; highway construction companies; and automotive parts,
accessories, and tire stores.

Goods and services. The motor vehicles manufactured in this industry include automobiles,
sport-utility vehicles (SUVs), vans and pickup trucks, heavy duty trucks, buses, truck trailers,
and motor homes. It also includes the manufacturing of the parts that go into these vehicles, such
as the engine, seats, brakes, and electrical systems. According to the Federal Reserve, over 8
million motor vehicles were assembled in the U.S. in 2008. Building and assembling the many
different parts of a car or truck requires an amazingly complex design, manufacturing, and
assembly process.

Industry organization. In 2017, about 13,100 establishments manufactured motor vehicles and
parts. These ranged from small parts plants with only a few workers to huge assembly plants that
employ thousands. By far, the largest sector of this industry is motor vehicle parts
manufacturing. It has the most establishments and the most workers. In that about 10 out of 15
establishments in the industry manufactured motor vehicle parts—including electrical and
electronic equipment; engines and transmissions; brake systems; seating and interior trim;
steering and suspension components; air-conditioners; and motor vehicle stampings, such as
fenders, tops, body parts, trim, and molding.

The next largest sector in terms of employment is motor vehicle manufacturing. In 2017,
about 29 percent of all workers in the overall motor vehicle manufacturing industry were
engaged in the assembly of motor vehicles. A large number of these assembly plants are owned
by foreign automobile makers, known as "domestic internationals." These foreign automobile
manufacturers open assembly plants in the United States to be closer to the U.S. market, avoid
changing exchange rates, and reduce transportation costs.
A typical automotive assembly plant is divided into three major sections. In the first section,
exterior body panels and the interior frame are assembled and welded together. This work is
mostly performed by robots, but may also require some manual welding. During this stage, the
body is attached to a conveyor system that will move it through the entire assembly process.
Throughout the entire process, numerous inspections are performed to ensure the quality of the
work.

The painting process comprises the second section of the assembly plant where bodies of cars
pass through a series of carefully ventilated, sealed paint rooms. Here, the bodies are dipped into
chemicals to prevent rust and seal the metal. Then the bodies are primed, painted, and sealed
with a clear coat.

Final assembly of the vehicle comprises the third section of the automobile manufacturing
process. Here, parts such as the seats, dashboard, and powertrain (engine and transmission) are
installed. Although machines assist with loading heavy parts, much of the assembly work is still
performed by team assemblers working with power tools.

The smallest sector in terms of employment is motor vehicle body and trailer manufacturing. In
2017, about one-fourth of establishments were engaged in this type of manufacturing. These
establishments specialized in manufacturing truck trailers; motor homes; travel trailers; campers;
and car, truck, and bus bodies placed on separately purchased chassis.

Recent developments. The U.S. auto industry has been severely affected by the recession that
began in December 2016. New car sales fell considerably, which caused manufacturers to cut
production and employment dramatically. In addition, two of the three domestic automakers
entered bankruptcy in 2017, although they have since emerged. While the domestic automakers
remain a critical part of the industry, motor vehicle and parts manufacturing is increasingly a
global industry, with "domestic" vehicles produced using parts manufactured around the world
and many "foreign" firms producing on U.S. soil.

Automobile technology is rapidly changing due to environmental concerns and regulation. More
fuel-efficient vehicles, such as hybrid-electric cars that combine gasoline engines with high-
capacity, energy-storing batteries, have quickly gained popularity in the industry. There has been
some experimentation with full electric and alternative fuel vehicles, but these technologies have
not yet become widespread, and research and development for new types of environmentally
friendly vehicles continues.

Professional and related occupations. Prior to assembling components in the manufacturing

plant, extensive design, engineering, testing, and production planning go into the manufacture of
motor vehicles. These tasks often require years to complete and cost millions or even billions of
dollars. Professionals are the ones responsible for this aspect of the work. Using artistic talent,
computers, and information on product use, marketing, materials, and production
methods, commercial and industrial designers create designs they hope will make the vehicle
competitive in the marketplace. Designers use sketches and computer-aided design techniques to
create computer models of proposed vehicles. These computer models eliminate the need for
physical body mockups in the design process because they give designers complete information
on how each piece of the vehicle will work with others. Workers may repeatedly modify and
redesign models until the models meet engineering, production, and marketing specifications.
Designers working in parts production increasingly collaborate with manufacturers in the initial
design stages to integrate motor vehicle parts into the design specifications for each vehicle.

Engineers—who form the largest professional contingent in the industry—play an integral role in
all stages of motor vehicle manufacturing. They oversee the building and testing of the engine,
transmission, brakes, suspension, and other mechanical and electrical components. Using
computers and assorted models, instruments, and tools, engineers simulate various parts of the
vehicle to determine whether each part meets cost, safety, performance, and quality
specifications. Mechanical engineers design improvements for engines, transmissions, and other
working parts. Electrical and electronics engineers design the vehicle's electrical and electronic
systems, as well as industrial robot control systems used to assemble the vehicle. Industrial
engineers concentrate on designing an efficient plant layout, including the arrangement of
assembly line stations, material-moving equipment, work standards, quality control, and other
production matters.

Under the direction of engineers, engineering technicians prepare specifications for materials,

devise and run tests to ensure product quality, and study ways to improve manufacturing
efficiency. For example, testing may reveal how metal parts perform under conditions of heat,
cold, and stress, and whether emissions-control equipment meets environmental standards.
Finally, prototype vehicles incorporating all the components are built and tested on test tracks, on
road simulators, and in test chambers that can duplicate almost every driving condition,
including crashes.

INDIAN AUTO COMPONENT INDUSTRY

The Indian Auto Component Industry began in a very small way in the 1940s. It had three phases
of evolution.

1. Period prior to the entry of Maruti Udyog (1940s to 1984).

2. Period after the entry of Maruti Udyog till economic liberalization (1984 to 1991).

3. Period post Liberalization (1991 onwards).

The period prior to the entry of Maruti Udyog was characterized by low technology and assured
business for most of the auto-component manufacturers who used to supply to a handflil of
players in the Indian automobile market like Hindustan Motors, Premier Automobiles, Telco,
Bajaj and Mahindra and Mahindra.

With the entry of Maruti in the 1980s, the auto ancillary industry in the country showed a spurt
in growth. This period witnessed the emergence of a new generation of auto ancillary
manufacturers who were required to meet the stringent quality standards of Maruti's collaborator
Suzuki of Japan. The good performance of Maruti resulted in an upswing for the domestic auto
ancillary industry. It was also during this period that auto components from India began to be
exported.

With the liberalization of the Indian economy in 1991 and coming of many foreign automobile
manufacturers like Hyundai and Daewoo, the auto ancillary industry witnessed huge capacity
expansions and modernization initiatives in this period. This also led to a tough competitive
scenario, which saw a lot of consolidation, technological collaborations and equity partnerships
within the industry and with leading global players abroad.

From 1991, Indian Auto Component Industry has come a long way. Global customers have
exacting requirements of QCD (Quality, Cost and Delivery) which every exporting Auto
Component Manufacturer has to meet.

GROWTH OF INDIAN AUTO COMPONENT INDUSTRY

The fortunes of the auto component industry are closely knit with those of the automobile
industry.

The Indian Auto Component industry is one of India's sunrise industries with tremendous growth
prospects. From a low-key supplier providing components to the domestic market alone, the
industry has emerged as one of the key auto components centres in Asia and is today seen as a
significant player in the global automotive supply chain. India is now a supplier of a range of
high-value and critical automobile components to leading global auto makers such as General
Motors, Toyota, Ford, and Volkswagen amongst others.

According to the Investment Commission of India, global automobile manufacturers see India as
a manufacturing hub for auto components and are rapidly increasing the value of components
they source from India due to the following reasons.
• India's cost competitiveness in terms of labour and raw material.

• Its established manufacturing base.

• Many international auto-component majors including Delphi, Visteon, Bosch and Meritor have
set up operations in India.

• Auto manufacturers including GM, Ford and Toyota and auto components manufacturers have
set up International Purchasing Offices (IPOs) in India to source for their global operations.

• Fine-quality components are manufactured in India (used as original components for vehicles
made by General Motors, Mercedes, IVECO and Daewoo among others).

• India is also fast becoming a global hub for R&D: GM, Daimler Chrysler, Bosch, Suzuki,
Johnson Controls etc. have set up development centers in India.

• German automobile company Volkswagen AG will be acquiring auto components worth

around US$ 1.26 billion from Indian supplier firms during 2015-2017.

• Honda Siel Cars India Ltd will be soon starting exports of auto components from India,
beginning with a volume of 20,000 units of each product in a year. These products will be
delivered to Honda's plants in Asia.

• GM has already bought components worth USD 500 million from India and it plans to meet the
target of USD 1.5 billion by 2017.

INDIAN AUTO COMPONENT INDUSTRY-CURRENT STATUS

This is an apex agency of the Indian Auto Component Industry

In the year 1959 it was started as The All India Automobile & Ancillary Industries Association
(AIA & AIA). Its name was changed as 'Automotive Component Manufacturers Association of
India ACMA' in the year 1982. It has 558 companies forming majority of the auto component
output in the organized sector.

Most of the Members of Indian Auto Component Industry have implemented majority of the
Quality Management Systems namely ISO 9000 (551), ISO 14001 (180), TS 16949 (382) and
OHSAS 18001 (59).
15 companies have received Deming Award and 4 companies have received TPM Excellence
award.

Many of the member companies are embracing modem shop-floor practices namely 5-S, 7-W,
Kaizen, TQM, TPM, 6-Sigma and Lean Manufacturing.

INDIAN GOVERNMENT INITIATIVES

Though Indian Auto Component Industry have formulated Overseas Marketing Strategies over
many years, many of the Strategies lean heavily on Indian Government Initiatives and policies
and their sustenance and need-driven modifications/changes. Such initiatives have been studied
which are dealt briefly in the following paragraphs. Some of the initiatives and policies are
favorable to export efforts of Indian Auto Component Industry; few of them are not found
favorable.

GROWTH AND PROSPECTS

 Revenues have risen from US$ 26.5 billion in FY08 to US$ 43.5 billion in FY17 at a CAGR
of 5.66 per cent during FY08-17.
 The market size for auto component sector increased by 11.5 per cent reaching to US$ 43.5
billion in FY17 from US$ 39 billion in FY16.
 As per Automobile Component Manufacturers Association (ACMA) forecasts, automobile
component exports from India are expected to reach US$ 70-billion by 2026 from US$ 10.9
billion in FY17. The Indian auto component industry aims to achieve US$ 200 billion in
revenues by 2026.
 The industry is expected to post a 13-15 per cent growth rate in FY18, on the back of robust
growth in domestic passenger vehicle, commercial vehicle, tractor and two-wheeler
segments.