Want a lesson or two on the risks of timing and the importance of shared global opportunities in the world of business?
Look no further than Sheela Woodbridge Urethanes Pvt. Ltd., a joint-venture between Mississauga -based Woodbridge Foam Corp., and India-based Sheela Group.
Formed in 2006, the venture supplies car makers with seat cushions. India's auto industry was booming until last year when it petered out after a local industrial slowdown resulting from interest-rate increases. Disposable incomes suffered, and costs increased for manufacturers and buyers. Sheela Woodbridge's plant on the outskirts of Delhi commenced operations just past the last round of the boom.
"The order comes to you when the car is being designed," says Rahul Gautam, chairman of the company.
Sheela Woodbridge got its first order from Honda Motor Co., and as luck would have it, the car company's Jazz model was subject to a recall. It had nothing to do with parts supplied by Sheela Woodbridge, but demand for the vehicle was affected. The Japanese auto maker helped Sheela Woodbridge with some orders for its Brio model but they have been delayed by six months.
Flooding in Thailand and the tsunami in Japan last year also cast shadows on the company's prospects – indicators of how a sneeze in one place can cause a cold thousands of kilometres away.
On the plus side, business is chugging along thanks to two significant India-based customers: Tata Motors and Mahindra & Mahindra. Sheela Woodbridge is supplying seats for Tata's Magic van and Mahindra's SUV, the XUV500. What could have an even greater impact on the company's bottom line is the world's cheapest car, the Nano, from Tata Motors.
Sheela Woodbridge's second plant is up and running in the Western state of Gujarat. The Nano had initially been hit by technical issues, delays and sluggish demand, despite a price tag of $ 2,800. Now, with 9,000 of the small cars moving every month, business is looking up. Sheela Woodbridge is also in advanced talks with General Motors and its Indian unit, which could put the operation on even more solid ground.
"The venture still has a very small market share of 5 per cent but the potential is huge," Mr. Gautam says. "And our capacities are enough to double the production."
Foam-based products are logistically difficult to transport, so plants are required to be closer to their original equipment manufacturers. "In India, the auto industry is not located on the basis of best (business) factors but on the basis of taxation and supportive governments," Mr. Gautam says.
Gujarat is 900 kilometres to the south-west of Sheela Woodbridge's plant in Delhi.
But location headaches are offset by other positives – the partners complement each other nicely. Sheela Group has a 30 per cent market share of foam products in India and it has a distribution network and the experience to help Woodbridge gain a foothold. The group, which records annual sales of around $180 million in India and about $60 million in Australia, was founded by Sheela Gautam, whose son Rahul took over when she moved into politics (she has served four terms as a federal lawmaker).
Rahul is an engineer with a degree from the prestigious Indian Institute of Technology.
Woodbridge's strength is on the design side, and in its global relationships with names such as Volkswagen, Toyota, Suzuki and Mercedes, which for Sheela Group can open doors to the global automotive industry – its staples are mattresses and pillows.
There are two added bonuses for Woodbridge. Six India-based design engineers are now employed by its global team, reducing costs as they combine Internet-based work with occasional flights to some of the 56 countries in which the company does business. It's a lean, mean operation from the point of view of its global managers, though the two plants in India employ 125 workers.
The other bonus is that Sheela Group is also a customer for the joint-venture's molded pillows and mattresses. With its Sleepwell mattress brand and presence across India, the local side provides Woodbridge an opening into a huge housing boom in a country that's a billion people strong, and where every apartment has potential customers.
Special to the Globe and Mail
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.
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