T&A Visits Apollo’s Limbda and new Chennai Factories
If you cast your mind back to before 2009’s Apollo/Vredestein merger deal was announced there was much talk about plans for the construction of a greenfield tyre production plant in Hungary. Newspaper reports published at the time suggested that Apollo had earmarked around 200 million euros for this. Most observers interpreted the Vredestein purchase as being a substitute for the Greenfield plans, but bearing in mind that the pricetag was reported as being just US$ 50 million in June 2010, it raises the question of what was done with the rest of the money. The short answer is that Apollo executives say they have invested it in the construction and rapid development of its Chennai manufacturing facility, which had a budget of around 350 million euros before the firm decided to further its plans for truck and bus radial tyre production last year. Anything else looks like to have been absorbed by the company’s liabilities. However, regarding the Chennai investment Tyres & Accessories recently had the opportunity to tour the facility, see production in action and learn more about the thinking behind the investment.
If the 2005 to 2010 period were the “wonder years” (see Apollo Aiming for ‘At Least’ The Top 10’ – T&A December 2010), then the management is now looking to 2015/2016 for the next milestone. The challenge for the company in this respect is to open up new markets. First there is China which, while the company does maintain a presence there at the moment, doesn’t figure highly in its current operations. According to Neeraj Kanwar this huge market (and another so-called emerging market, Indonesia) have to figure in the firm’s thinking in the future. Then there are the many and varied African and Middle Eastern markets. And lastly, but by no means least, the Latin American markets. “When I enter the Latin American markets we will got at them with the Apollo brand. Once established there we can make the decision about bringing in Vredestein.” Opening up new markets – without even considering the growth of the firm’s existing replacement markets and OE deals – requires a considerable amount of extra production capacity. So the question remains where will the company’s next capital production plant be? “I will follow the market,” Neeraj Kanwar told T&A when we visited the company’s Gurgaon headquarters in November, adding: “I will build up my markets first – Greenfield will follow.”
The hint is, as some Indian business journalists recently confirmed to T&A and as all this talk about opening up new markets might infer, that the company is considering investing in a another new production facility. Nevertheless, while the company refuses to confirm or deny the veracity of these suggestions, there have been plenty of other recent developments regarding the company’s tyre manufacturing capacity. And the firm’s Chennai and Limbda factories are prime examples.
Referring to Apollo’s intentions of perpetually improving product quality, Neeraj Kanwar continued: “If I make a tyre in India, Holland or South Africa they better be the same and they better be the best.” Kanwar hopes this emphasis on quality control, product development and the company’s branding and pricing strategy (see December’s T&A for more on this) will all work together to deliver sustainable business growth that is a strong competitor at the top of what Kanwar calls “tier two” of the tyre industry.
Chennai: a European factory in India
Apollo’s Chennai tyre production plant is a facility built with all of this in mind. Two things are instantly noticeable in the plant, that there is an “almost European level of automation” (and therefore a surprisingly small headcount). And secondly that there is plenty to room and a clear intention to ramp up production further than its current levels.
Construction for the Chennai plant started in December 2008, with the first passenger car tyres being produced 14 months later. The first truck and bus radial followed on 21 March 2010 and when T&A visited in November last year the engineering staff confirmed that production had reached around 5500 passenger car and 1100 truck radials a day, meaning they had all but completed the first phase of production (8000 car and 1100 truck tyres). Phase two will see staff increase truck tyre output to around 6000 units a day, before doubling car tyre production to 16,000 tyres daily. Terminal capacity for the site is said to be 30,000 car tyres and 9000 truck radials a day.
Less than two years after breaking ground on the Chennai project, Apollo’s most high-tech facility gained OE approval from Hyundai. So what is behind the factory’s apparent rapid success? Firstly the factory is designed for the rigours of the European and North American markets. It is staffed exclusively by engineers and technicians – no-one operating the equipment is anything less than a diploma qualified technician. Many are university engineering graduates that have spent six to eight month’s training at company’s Baroda operation. The average age of employees in Chennai is 23.
The factory’s equipment needs are met by some impressive technology including examples of the most modern uni-stage building machines in the passenger car line, while the truck and bus line is currently based on the modern principles of two-stage automatic building processes. The truck tyre production facility has already integrated an automatic monorail system to ensure that no product touches the ground. And at the end of the production process tyres are weighed some are stored in an automated stocking system. Bespoke variations of building equipment were designed and specified in-house before being manufactured and installed by Dutch suppliers VMI. In addition Fischer body splice cutters and other cutters produced by Konstrukta can be seen in operation.
By the time the company reaches the third phase of development Apollo will have invested 400 million euros on the plant. 250 million is said to have already been spent with the next 100 million being invested in the first quarter of 2011.
New factory, R&D centre sand state proving to support OE development
One of the main reasons for Apollo’s increased investment in research, product development and manufacturing capabilities is because the company is set on developing itself as an OE supplier. The recent development of OE sales illustrate this point, with Limba plant heads saying OE tyre shipments grew from 5000 units a month in 2000 to 181,000 in 2010 – and rising.
Apollo already supplies a range of manufacturers in India and is said to be in talks with BMW, Mercedes and Audi there. However, the company also has it sights set on more European contracts with potential deals with Fiat, Mercedes and Audi said to be “in the pipeline.” So, as you would expect from a tyre maker with both global and OE ambitions, the company’s latest generation of tyres are described as having been designed with labelling legislation in mind. This means using low rolling resistance compounds and offering low noise properties. The latter development is said to have been borne out of a real in-house innovation, with Apollo researchers having developed their own bespoke tread noise simulation software developed at the Limba plant’s research facility.
Up till now Apollo’s annual R&D investment is has been around 2 per cent of sales per annum, but this is expected to increase to around 5 per cent a year over the next five years. And a new research and development centre is expected to come along with this. According to the company, architectural plans have already been finalised for construction in Chennai. In a final piece of providential planning executives told T&A during our tour of the Chennai facility that the Indian government is investing in the establishment of a proving ground literally around the corner from Apollo’s Chennai site. Apollo is expected to partner with the site, with company representatives explaining that plans for this had been in place prior to the construction of the Chennai tyre factory. This test track, which will of course be available for use by both car manufacturers and other tyre suppliers, is expected to be completed around 2012. And finally the company is also planning to invest in a mould manufacturing business alongside the Chennai tyre factory. No details have yet been released about the size of the investment associated with any of these three projects.
Limbda factory increases radial output, adds OTR tyre production
During a recent interview with Tyres & Accessories Apollo MD Neeraj Kanwar shared details of how the company plans to use green technology improve the efficiency and ecological responsibility, including projects like how to use bio fuels to run plants more ecologically. Other ideas include the usage of “completely new materials” in plans for improving rolling resistance, plus paper and water saving strategies.
One example of how this mindset is being applied in practice can be seen in the improvements (some of them ecologically orientated) Apollo has made to its Limbda passenger car/light truck radial, OTR tyre and cross-ply tyre plant. Since 2002 the tyre manufacturing operations at Apollo’s Limbda factory have managed to double tyre output while markedly reducing (-22 per cent) and fuel consumption (-45 per cent). But that[‘s not all, 20 per cent of the plant’s power now comes from wind turbines and the company reports that it is implementing power generated by turbines driven by the waste steam of a neighbouring company.
The Limda, Gujarat factory was Apollo’s second production base to be established when it was built in 1991. Since then the site has grown into one of the largest tyre facilities in India. And with production output equating to between 400 and 500 tonnes of product a day, company representatives said it could even be one of the largest in Asia. When you consider the fact that the company’s research and technology laboratories are also based here, it is clear that this really is a large operation. However with a new R&D centre planned for construction alongside the new Chennai plant, it is unlikely that the Apollo Research and Technology will continue to run such a large operation alongside the Limba operation when the new laboratories are completed.
Radial production started in Limbda around 2000. The factory gained BS OHSAS for the second year in February 2010. Equipment-wise majority of the Limbda plant’s passenger car and light truck radial first stage manufacturing machinery is supplied by Continental and VMI. When T&A visited the factory was operating 109 of a total of 103 steam curing presses. As far as quality control is concerned,100 per cent of tyres are balanced on an AkroDyne testing machine and then hand inspected. A random sample of 1000 units a day are also x-rayed as an added measure.
Plant diversifies into OTR tyre production
At an earlier interview with Apollo Vredestein boss Rob Oudshorrm, the managing director said, referring to OTR production including agricultural tyres and industrial tyres, “if they are not part of the range already they are expected to come – the management is clear about the fact that there is still more to be done.” 24 hours later when T&A visited the Limbda plant it was plain to see how serious Apollo is about broadening its range to include some very large sizes.
Apollo produced its first 49-inch OTR tyre at the Limbda plant on 1 March 2009. This 990 kilogram product took the firm 320 minutes to cure, but engineers told T&A that the largest sizes they product require curing times in excess of 8 hours.
Much of what Apollo’s developing OTR division produces is sold to OE contracts such as the largest single customer Bharat Earthmovers Ltd (BEML). Currently 90 to 95 per cent of production is destined for OE. By supplying the leading OEMs in the regional earth mover market Apollo is well positioned to lead of the future requirements in the sector. But that is not to say the range is narrow, while the company’s OTR business is just a few years old, it already offers up to three different OTR compounds per line and up to six across the whole range, depending on application.
Most of the machinery in the OTR tyre plant is produced by Chinese equipment makers, but the quality is sufficient to produce five OTR tyres a day and therefore around 1500 a year. In addition the Apollo OTR production line is reportedly home to Asia’s largest tyre press, which is capable of producing tyres of up 57 inches in diameter. However, with Bridgestone capable of exceeding this at its OTR factories in Japan, it is more likely that Apollo’s equipment is the largest in India.
One earthmover tyre company that has reportedly purchased from the Limbda factory’s production line is OTR Tyres Ltd of Alfreton a company that is familiar to readers of this magazine and shows that some, at least, of Apollo’s many and varied global ambitions are already coming into fruition.