India has been a little slower than what we thought: Tommy Mitchell

Interview with General manager, supply chain, distributed power, GE

Tommy Mitchell, general manager, supply chain, distributed power, GE, believes growth in India's power sector has been slow but GE is here to stay. Last year, GE invested $200 million in a multi-modal manufacturing hub in Pune, a first of its kind in an emerging market. In an interview with Shivani Shinde Nadhe, he talks about the Pune centre, India's power sector and what makes GE bet on India. Excerpts:

GE has 13 manufacturing centres in India, why the need for a centre in Pune?

Our investment to build a factory in Pune is tied to our localisation commitment. We realised very early that to be successful in India we need to have 'In India, for India' products. The Pune facility is a multi-modal centre, which means we want this to be a manufacturing hub for all GE businesses. The other 13 plants are specific to one industry or the other. The Pune plant will serve our businesses like aviation, oil and gas, power-generation equipment, perhaps transportation down the line, and even health care.

For some of our business like aviation we are manufacturing in Pune for exports. Centres that were made with the 'In India, for India' concept have been successful enough that we can now start using them for exports. Aviation is one example.

By when will the centre be ready for production?

We are right in the middle of a ramp up and we will be finally open by mid-2014. Even as we launched the Chakan facility, we leased a facility at Ranjengaon in Pune two years back. As we were building our infrastructure, we were also building our team, employment, capability, skills in qualifying our management. And now as construction is coming to an end we have started moving these people to the new centre. So far, we have moved half of our leased facility manufacturing, consisting of equipment, machinery, and employees, into Chakan.

The total area we have is 67 acres. We are in phase-1 of development, wherein we have built 250,000 sq ft of manufacturing facility. We have the ability to go up to 1 million sq ft. I hope we sell more locally and we build more products. By the time we will be finally ready to open, we will have an employee base of 500 at Chakan from the current 350.

Why the need to set-up a multi-modal centre?

We have learnt over time that whenever we have scale, we do really well. When we are small and divided we don't take the right level of opportunity. So while these 13 plants are productive in their own terms, we think we can be bigger if all businesses are together.

This multi-modal concept was started a little bit in our energy business (now known as power & water). They started to do multiple manufacturing for several energy units, in China and Vietnam, and we learnt from those experiences. We also realised that if at any time one business is slow then we can rotate resources to other businesses.

Other than India, we have a multi-modal centre in Nigeria, and we may have one in Latin America. We do have legacy multi-modal centres (one each) in China, Vietnam, and Hungary.

You have set up the supply chain for GE's power business in India. How has growth been in this sector?

Our prime business is heavy-duty gas turbine engines. There is a lot of potential and need in India for power generation and that is why three years back we made a serious commitment to be in India. India has been a little slower than what we thought, but we are here for the long term.

We did some good sales of heavy duty gas turbines back in 2010-11 with Reliance. Since then, a lot of projects have been on hold due to funding issues, economy, gas availability. We had really good momentum then but projects have since been stalled, slow, or pushed down. We are a bit disappointed. At the same time, though, in renewals, especially in wind turbines, we have done well.

If you compare the GDP numbers to some of the ASEAN countries or to China then, yes, growth in India has dropped. But if you look at how India's economy matches up to GE's product mix, it is an amazing fit. Whether the growth rate is 5.4 per cent or four per cent or eight per cent, it still is a perfect market for GE. There are other markets as well, but India is key to our Asia presence.

GE earlier this year announced the creation of distributed power as an independent business unit. Does India fit in that business?

Distributed power basically means power at the point of the user, and closer to the consumption point or off-grid.

Though we are new group, we are a $5-6 billion piece of GE Power. The $1.4-billion investment the company announced is to drive distributed power growth. Our studies indicate that distributed power will grow faster than grid power. There is still a good demand for centralised grid power and heavy duty gas turbines, but distributed power is growing faster.

India is a diesel power market, whereas we have focused on natural gas applications on a larger scale. We also hope that as gas supply in India improves, we will have a bigger role to play.

You have set up the supply chain for GE Power in India. How crucial is supply chain management?

For us, supply chain means manufacturing, sourcing/procurement, quality, and environment health and safety. In India, that is why Pune is a big focus area. In the past, we did a lot of distribution by importing products, but then it increases costs, you do not get the right features. So we put up manufacturing locally. We have a huge engineering team in Jack Welch Technology Centre, as well as in Hyderabad in our energy engineering centre.